ACM Research, Inc. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Consolidated Financial Statements 83 Report of Independent Registered Public Accounting Firm ( Ernst & Young Hua Ming LLP , Shanghai, China , PCAOB ID# 1408 ) 84 Report of Independent Registered Public Accounting Firm ( Armanino LLP , San Ramon, CA , PCAOB ID# 32 ) 87 Report of Independent Registered Public Accounting Firm ( BDO China Shu Lun Pan Certified Public Accountants LLP , Shenzhen, China , PCAOB ID# 1818 ) 88 Consolidated Balance Sheets as of December 31, 202 3 and 202 2 89 Consolidated Statements of Comprehensive Income (Loss) for the Years ended December 31, 2023, 2022, and 2021 90 Consolidated Statements of Changes in Stockholders’ Equity for the Years ended December 31, 2023, 2022, and 2021 91 Consolidated Statements of Cash Flows for the Years ended December 31, 2023, 2022, and 2021 92 Notes to Consolidated Financial Statements 93 83 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of ACM Research, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of ACM Research, Inc. (the Company) as of December 31, 2023, the related consolidated statements of comprehensive income , changes in stockholders' equity and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2024 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. 84 Table of Contents Revenue Recognition Description of the Matter As described in Notes 2 to the consolidated financial statements, t he Company recognizes revenue from tools and spare parts at a point in time, when the Company has satisfied its performance obligation. For shipments made to a customer that has not previously accepted a specific type of tool (“first tools”), revenues are recognized when the tools are accepted by the customer. For shipments made to a customer that have previously accepted a specific type of tool (“repeat shipments”), revenues are recognized upon shipment or delivery because the Company can objectively demonstrate that the tools meet all the required customer specifications. Evaluating the sufficiency of audit evidence to validate whether the Company can objectively identify repeat shipments required auditor judgment and significant audit effort because the Company’s tools are highly customized for each customer. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s revenue process. For example, we tested the controls over management’s review of the Company’s analysis to determine whether the repeat shipments identified have been previously accepted by the same customer. To test whether the Company can objectively demonstrate that the highly customized tools are repeat shipments , our audit procedures, among others, included performing direct inquiries with the Company’s personnel from its sales and engineering department to understand the Company’s process of identifying repeat shipments and the quality control department to understand the quality control process. We applied auditor judgment to determine the nature and extent of procedures to be performed by testing all the sales transactions identified as repeat shipments during the year. Specifically for all repeat shipments, we obtained the quality control reports signed by the Company’s quality control department. We also identified the similar tools previously sold to and accepted by the same customer by comparing the executed contracts or purchase orders of both tools, and inspected the acceptance confirmation from the customer of the previous tools to verify that the Company was able to objectively demonstrate that repeat shipments meet all the required customer specifications with its established history of customer acceptance. We evaluated the overall sufficiency of audit evidence obtained by assessing the results of procedures performed over repeat shipments, including the appropriateness of the nature and extent of audit effort. /s/ Ernst & Young Hua Ming LLP We have served as the Company's auditor since 2023. Shanghai, the People’s Republic of China February 28, 2024 85 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of ACM Research, Inc. Opinion on Internal Control Over Financial Reporting We have audited ACM Research, Inc.’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, ACM Research, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2023, the related consolidated statements of comprehensive income , changes in stockholders' equity and cash flows for the year ended December 31, 2023, and the related notes and our report dated February 28, 2024 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young Hua Ming LLP Shanghai, the People’s Republic of China February 28, 2024 86 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of ACM Research, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of ACM Research, Inc. and subsidiaries (the Company) as of December 31, 2022, and the related consolidated statements of comprehensive income (loss), changes in stockholders’ equity, and cash flows for the year ended December 31, 2022, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/Armanino LLP We served as the Company’s auditor in 2022. In 2023, we became the predecessor auditor. San Ramon, California March 1, 2023 87 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors ACM Research, Inc. Fremont, California Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows of ACM Research, Inc. and subsidiaries (the “Company”) for the year ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2021 , in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/BDO China Shu Lun Pan Certified Public Accountants LLP We served as the Company’s auditor from 2015 to 2022. Shenzhen, The People’s Republic of China March 1, 2022, except for the effects of the common stock split discussed in Notes 1 and 2 to the consolidated financial statements, as to which the date is March 1, 2023. 88 Table of Contents ACM RESEARCH, INC. Consolidated Balance Sheets (In thousands, except per share data) December 31, 2023 2022 Assets Current assets: Cash and cash equivalents (note 2) $ 182,090 $ 247,951 Restricted cash 1,083 500 Short-term time deposits (note 2) 80,524 70,492 Short-term investments (note 15) 21,312 20,209 Accounts receivable, net (note 4) 283,186 182,936 Other receivables 40,065 29,617 Inventories, net (note 5) 545,395 393,172 Advances to related party (note 16) 2,432 3,322 Prepaid expenses 20,023 15,607 Total current assets 1,176,110 963,806 Property, plant and equipment, net (note 6) 201,848 82,875 Land use right, net (note 7) 8,367 8,692 Operating lease right-of-use assets, net (note 11) 7,026 2,489 Intangible assets, net 2,538 1,255 Long-term time deposits (note 2) 40,818 101,956 Deferred tax assets (note 19) 20,271 6,703 Long-term investments (note 14) 27,880 17,459 Other long-term assets (note 8) 6,050 50,265 Total assets $ 1,490,908 $ 1,235,500 Liabilities and Equity Current liabilities: Short-term borrowings (note 9) $ 31,335 $ 56,004 Current portion of long-term borrowings (note 12) 6,783 2,322 Related party accounts payable (note 16) 11,407 14,468 Accounts payable 141,814 101,735 Advances from customers 181,368 153,773 Deferred revenue 3,687 4,174 Income taxes payable (note 19) 6,401 3,469 FIN-48 payable (note 19) 12,149 6,686 Other payables and accrued expenses (note 10) 102,951 52,201 Current portion of operating lease liability (note 11) 2,764 1,382 Total current liabilities 500,659 396,214 Long-term borrowings (note 12) 53,952 18,687 Long-term operating lease liability (note 11) 4,262 1,107 Other long-term liabilities (note 13) 5,873 7,321 Total liabilities 564,746 423,329 Commitments and contingencies (note 21) Equity: Stockholders’ equity: Class A Common stock (note 17) 6 5 Class B Common stock (note 17) 1 1 Additional paid-in capital 629,845 604,089 Retained earnings 156,827 94,426 Statutory surplus reserve (note 2) 30,060 16,881 Accumulated other comprehensive loss ( 49,349 ) ( 40,546 ) Total ACM Research, Inc. stockholders’ equity 767,390 674,856 Non-controlling interests 158,772 137,315 Total equity 926,162 812,171 Total liabilities and equity $ 1,490,908 $ 1,235,500 The accompanying notes are an integral part of these consolidated financial statements. 89 Table of Contents ACM RESEARCH, INC. Consolidated Statements of Comprehensive Income (Loss) (In thousands, except per share data) Year Ended December 31, 2023 2022 2021 Revenue (note 3) $ 557,723 $ 388,832 $ 259,751 Cost of revenue, including cost of revenue from related party of $ 31,240 and $ 26,313 for the year ended December 31, 2023 and 2022, respectively (note 16) 281,508 205,217 144,895 Gross profit 276,215 183,615 114,856 Operating expenses: Sales and marketing 47,019 39,889 26,733 Research and development 92,709 62,226 34,207 General and administrative 40,648 22,465 15,214 Total operating expenses 180,376 124,580 76,154 Income from operations 95,839 59,035 38,702 Interest income 8,354 8,740 505 Interest expense ( 2,681 ) ( 1,655 ) ( 765 ) Realized gain from sale of short-term investments 9,047 1,116 — Unrealized gain (loss) on short-term investments ( 2,737 ) ( 7,855 ) 607 Other income (expense), net ( 1,558 ) 3,315 ( 631 ) Income from equity method investments 9,952 4,666 4,637 Income before income taxes 116,216 67,362 43,055 Income tax expense (note 19) ( 19,364 ) ( 16,798 ) ( 134 ) Net income 96,852 50,564 42,921 Less: Net income attributable to non-controlling interests 19,503 11,301 5,164 Net income attributable to ACM Research, Inc. $ 77,349 $ 39,263 $ 37,757 Comprehensive income (loss): Net income $ 96,852 $ 50,564 $ 42,921 Foreign currency translation adjustment, net of tax ( 10,617 ) ( 59,102 ) 4,695 Comprehensive income (loss) 86,235 ( 8,538 ) 47,616 Less: Comprehensive income attributable to non-controlling interests 17,689 1,854 5,607 Comprehensive income (loss) attributable to ACM Research, Inc. $ 68,546 $ ( 10,392 ) $ 42,009 Net income per common stock (note 2): Basic $ 1.29 $ 0.66 $ 0.65 Diluted $ 1.16 $ 0.59 $ 0.58 Weighted average common stock outstanding used in computing per share amounts (note 2): Basic 60,164,670 59,235,975 57,654,708 Diluted 64,870,543 65,341,771 65,356,716 The accompanying notes are an integral part of these consolidated financial statements. 90 Table of Contents ACM RESEARCH, INC. Consolidated Statement of Changes in Stockholders’ Equity (In thousands, except per share data) Common Stock Class A Common Stock Class B Shares Amount Shares Amount Additional Paid- in Capital Retained Earnings Statutory Surplus Reserve Accumulated Other Comprehensive Income (Loss) Non-controlling Interests Total Equity Balance at December 31, 2020 50,690,079 $ 5 5,407,818 $ 1 $ 102,000 $ 29,899 $ 4,388 $ 4,857 $ 67,020 $ 208,170 Net income - - - - - 37,757 - - 5,164 42,921 Appropriation to statutory surplus reserves - - - - - ( 3,924 ) 3,924 - - — Foreign currency translation adjustment - - - - - - - 4,252 443 4,695 Exercise of stock options 1,870,803 - - - 3,430 - - - - 3,430 Stock-based compensation - - - - 5,117 - - - - 5,117 Exercise of stock warrants 728,043 - 0 - 1,820 - - - - 1,820 Conversion of Class B common stock to Class A common stock 320,004 - ( 320,004 ) - - - - - - — Proceeds from a subsidiary equity issuance 0 - - - 482,678 - - - 62,834 545,512 Balance at December 31, 2021 53,608,929 5 5,087,814 1 595,045 63,732 8,312 9,109 135,461 811,665 Net income - - - - - 39,263 - - 11,301 50,564 Appropriation to statutory surplus reserves - - - - - ( 8,569 ) 8,569 - - - Foreign currency translation adjustment - - - - - - - ( 49,655 ) ( 9,447 ) ( 59,102 ) Exercise of stock options 980,354 - - - 1,314 - - - - 1,314 Stock-based compensation - - - - 7,730 - - - - 7,730 Conversion of Class B common stock to Class A common stock 66,003 - ( 66,003 ) - - - - - - - Balance at December 31, 2022 54,655,286 5 5,021,811 1 604,089 94,426 16,881 ( 40,546 ) 137,315 812,171 Cumulative effect of change in accounting principle under ASC 326, net of tax ( 1,769 ) ( 1,769 ) Net income - - - - - 77,349 - - 19,503 96,852 Appropriation to statutory surplus reserves ( 13,179 ) 13,179 Foreign currency translation adjustment - - - - - - - ( 8,803 ) ( 1,814 ) ( 10,617 ) Exercise of stock options 1,380,886 1 - - 2,303 - - - 3,834 6,138 Stock-based compensation - - - - 23,453 - - - 3,885 27,338 ACM Shanghai dividends - - - - - - - - ( 3,951 ) ( 3,951 ) Balance at December 31, 2023 56,036,172 $ 6 5,021,811 $ 1 $ 629,845 $ 156,827 $ 30,060 $ ( 49,349 ) $ 158,772 $ 926,162 The accompanying notes are an integral part of these consolidated financial statements. 91 Table of Contents ACM RESEARCH, INC. Consolidated Statements of Cash Flows (In thousands) Year Ended December 31, 2023 2022 2021 Cash flows from operating activities: Net income $ 96,852 $ 50,564 $ 42,921 Adjustments to reconcile net income from operations to net cash used in operating activities Non-cash operating lease cost 3,580 2,816 2,451 Depreciation and amortization 8,092 5,366 2,353 Gain on disposals of property, plant and equipment ( 2 ) ( 12 ) — Realized gain on short-term investments ( 9,047 ) ( 1,116 ) — Income from equity method investments ( 9,952 ) ( 4,666 ) ( 4,637 ) Unrealized loss (gain) on short-term investments 2,737 7,855 ( 607 ) Inventory provision 575 2,248 75 Provision for credit losses 2,741 — — Deferred income taxes ( 13,647 ) 4,027 ( 1,840 ) Stock-based compensation 27,338 7,730 5,117 Net changes in operating assets and liabilities: Accounts receivable ( 108,749 ) ( 88,655 ) ( 47,624 ) Income tax recoverable — — ( 1,082 ) Other receivables ( 4,213 ) ( 7,331 ) ( 8,420 ) Inventories ( 164,027 ) ( 195,562 ) ( 127,731 ) Advances to related party (note 16) 890 ( 939 ) ( 776 ) Prepaid expenses ( 5,075 ) ( 3,695 ) ( 9,830 ) Other long-term assets — 3,986 ( 4,521 ) Related party accounts payable (note 16) ( 3,061 ) 6,569 3,806 Accounts payable 42,343 17,501 61,405 Advances from customers 29,974 104,258 34,831 Deferred revenue 2,693 994 226 Income taxes payable 3,009 3,236 2,200 FIN-48 payable 5,463 4,404 10,551 Other payables and accrued expenses 21,375 23,406 3,180 Operating lease liabilities ( 3,580 ) ( 2,816 ) ( 2,451 ) Other long-term liabilities ( 1,632 ) ( 2,362 ) 310 Net cash used in operating activities ( 75,323 ) ( 62,194 ) ( 40,093 ) Cash flows from investing activities: Purchase of property and equipment ( 61,876 ) ( 91,094 ) ( 9,153 ) Purchase of intangible assets ( 2,462 ) ( 1,426 ) ( 559 ) Purchase of long-term investments (note 14) ( 7,508 ) ( 5,279 ) ( 1,568 ) Purchase of short-term investments (note 15) ( 18,356 ) — — Purchase of time deposits ( 26,120 ) ( 172,448 ) — Proceeds from maturity of time deposits 79,600 — — Proceeds from sale of short-term investments (note 15) 21,735 4,577 — Proceeds from disposal of long-term investments 8,242 — — Net cash used in investing activities ( 6,745 ) ( 265,670 ) ( 11,280 ) Cash flows from financing activities: Proceeds from short-term borrowings 31,334 56,004 22,884 Repayments of short-term borrowings ( 55,068 ) ( 9,224 ) ( 39,809 ) Proceeds from long-term borrowings 42,360 — 7,056 Repayments of long-term borrowings ( 2,283 ) ( 2,223 ) ( 2,127 ) ACM Shanghai dividends ( 3,951 ) - — Proceeds from exercise of stock options 6,138 1,314 3,430 Proceeds from a subsidiary equity issuance, net of issuance costs — — 545,512 Proceeds from warrant exercise to common stock — — 1,820 Net cash provided by financing activities 18,530 45,871 538,766 Effect of exchange rate changes on cash, cash equivalents and restricted cash $ ( 1,740 ) $ ( 32,623 ) $ 3,908 Net increase (decrease) in cash, cash equivalents and restricted cash $ ( 65,278 ) $ ( 314,616 ) $ 491,301 Cash, cash equivalents and restricted cash at beginning of period 248,451 563,067 71,766 Cash, cash equivalents and restricted cash at end of period $ 183,173 $ 248,451 $ 563,067 Supplemental disclosure of cash flow information: Interest paid, net of capitalized interest $ 2,681 $ 1,655 $ 765 Cash paid for income taxes $ 26,103 $ 3,586 $ 1,132 Reconciliation of cash, cash equivalents and restricted cash in consolidated statements of cash flows: Cash and cash equivalents $ 182,090 $ 247,951 $ 562,548 Restricted cash 1,083 500 519 Cash, cash equivalents and restricted cash $ 183,173 $ 248,451 $ 563,067 Non-cash financing activities: Cashless exercise of stock options $ 333 $ 221 $ 137 Non-cash investing activities: Transfer from inventory to property, plant and equipment $ 4,379 $ — $ — Purchase property, plant and equipment through accounts payable and other payable $ 33,750 $ — $ — Transfer of prepayment for property to property, plant and equipment $ — $ 41,497 $ — The accompanying notes are an integral part of these consolidated financial statements. 92 Table of Contents ACM RESEARCH, INC. Notes to Consolidated Financial Statements (in thousands, except share and per share data) NOTE 1 – DESCRIPTION OF BUSINESS ACM Research, Inc. (“ACM” or "ACM Research") and its subsidiaries (collectively with ACM, the “Company”) develop, manufacture and sell single-wafer wet cleaning equipment used to improve the manufacturing process and yield for advanced integrated chips. The Company markets and sells its single-wafer wet-cleaning equipment, under the brand name “Ultra C,” based on the Company’s proprietary Space Alternated Phase Shift (“SAPS”) and Timely Energized Bubble Oscillation (“TEBO”) technologies. These tools are designed to remove random defects from a wafer surface efficiently, without damaging the wafer or its features, even at increasingly advanced process nodes. ACM was incorporated in California in 1998, and it initially focused on developing tools for manufacturing process steps involving the integration of ultra-low-K materials and copper. The Company’s early efforts focused on stress-free copper-polishing technology, and it sold tools based on that technology in the early 2000s. In 2006, the Company established its operational center in Shanghai in the People’s Republic of China ("mainland China"), where it operates through ACM’s subsidiary, ACM Research (Shanghai), Inc. (“ACM Shanghai”). ACM Shanghai was formed to help establish and build relationships with integrated circuit manufacturers in mainland China, and the Company initially financed its Shanghai operations in part through sales of non-controlling equity interests in ACM Shanghai. In 2007, the Company began to focus its development efforts on single-wafer wet-cleaning solutions for the front-end chip fabrication process. The Company introduced its SAPS megasonic technology, which can be applied in wet wafer cleaning at numerous steps during the chip fabrication process, in 2009. It introduced its TEBO technology, which can be applied at numerous steps during the fabrication of small node two-dimensional conventional and three-dimensional patterned wafers, in March 2016. The Company has designed its equipment models for SAPS and TEBO solutions using a modular configuration that enables it to create a wet-cleaning tool meeting the specific requirements of a customer, while using pre-existing designs for chamber, electrical, chemical delivery and other modules. In August 2018, the Company introduced its Ultra-C Tahoe wafer cleaning tool, which can deliver high cleaning performance with significantly less sulfuric acid than typically consumed by conventional high-temperature single-wafer cleaning tools. Based on its electro-chemical plating (“ECP”) technology, the Company introduced in March 2019 its Ultra ECP AP, or “Advanced Packaging,” tool for bumping, or applying copper, tin and nickel to semiconductor wafers at the die-level, and its Ultra ECP MAP, or “Multi-Anode Partial Plating,” tool to deliver advanced electrochemical copper plating for copper interconnect applications in front-end wafer fabrication processes. The Company also offers a range of custom-made equipment, including cleaners, coaters and developers, to back-end wafer assembly and packaging factories, principally in mainland China. In 2011, ACM Shanghai formed a wholly owned subsidiary in mainland China, ACM Research (Wuxi), Inc. (“ACM Wuxi”), to manage sales and service operations. In November 2016, ACM re-domesticated from California to Delaware pursuant to a merger in which ACM Research, Inc., a California corporation, was merged into a newly formed, wholly owned Delaware subsidiary, also named ACM Research, Inc. In June 2017, ACM formed a wholly owned subsidiary in Hong Kong, CleanChip Technologies Limited (“CleanChip”), to act on the Company’s behalf in Asian markets outside mainland China by, for example, serving as a trading partner between ACM Shanghai and its customers, procuring raw materials and components, performing sales and marketing activities, and making strategic investments. In August 2017, ACM purchased 18.77 % of ACM Shanghai’s equity interests held by Shanghai Science and Technology Venture Capital Co., Ltd. On November 8, 2017, ACM purchased the remaining 18.36 % of ACM Shanghai’s equity interest held by third parties, Shanghai Pudong High-Tech Investment Co., Ltd. (“PDHTI”) and Shanghai Zhangjiang Science & Technology Venture Capital Co., Ltd. (“ZSTVC”). At December 31, 2017, ACM owned all of the outstanding equity interests of ACM Shanghai, and indirectly through ACM Shanghai, owned all of the outstanding equity interests of ACM Wuxi. On November 2, 2017, the Registration Statement on Form S-1 (File No. 333- 220451) for ACM’s initial public offering of Class A common stock (the “IPO”) was declared effective by the U.S. Securities and Exchange Commission. Shares of 93 Table of Contents Class A common stock began trading on the Nasdaq Global Market on November 3, 2017, and the closing for the IPO was held on November 7, 2017. In December 2017, ACM formed a wholly owned subsidiary in the Republic of Korea (“Korea”), ACM Research Korea CO., LTD. (“ACM Korea”), to serve customers based in Korea and perform sales, marketing, research and development activities for new products and solutions. In March 2019, ACM Shanghai formed a wholly owned subsidiary in mainland China, Shengwei Research (Shanghai), Inc. (“ACM Shengwei”), to manage activities related to the addition of future long-term production capacity. In June 2019, CleanChip formed a wholly owned subsidiary in California, ACM Research (CA), Inc. (“ACM California”), to provide procurement services on behalf of ACM Shanghai. In June 2019, ACM announced plans to complete over the next three years a listing (the “STAR Listing”) of shares of ACM Shanghai on the Shanghai Stock Exchange’s new SciTech innovAtion boaRd, known as the STAR Market, and a concurrent initial public offering (the “STAR IPO”) of ACM Shanghai shares in mainland China. ACM Shanghai is currently ACM’s primary operating subsidiary, and at the time of announcement, was wholly owned by ACM. To meet a STAR Listing requirement that it have multiple independent stockholders in mainland China, ACM Shanghai completed private placements of its shares in June and November 2019, following which, as of September 30, 2020, the private placement investors held a total of 8.3 % of the outstanding shares of ACM Shanghai and ACM Research held the remaining 91.7 %. As part of the STAR Listing process, in June 2020 the ownership interests held by the private investors were reclassified from redeemable non-controlling interests to non-controlling interests as the redemption feature was terminated. In preparation for the STAR IPO, ACM completed a reorganization in December 2020 that included the sale of all of the shares of CleanChip by ACM to ACM Shanghai for $ 3,500 . The reorganization and sale had no impact on ACM’s consolidated financial statements. In August 2021, ACM formed a wholly owned subsidiary in Singapore, ACM research (Singapore) PTE, Ltd. to perform sales, marketing, and other business development activities. In November 2021, ACM’s operating subsidiary ACM Shanghai, completed its STAR IPO and its shares began trading on the STAR Market. In the STAR IPO, ACM Shanghai issued 43,355,753 shares, representing 10 % of the total 433,557,100 shares outstanding after the issuance. The shares were issued at a public offering price of RMB 85.00 per share, and the net proceeds of the STAR IPO, after issuance costs, totaled $ 545,512 . Upon completion of the STAR IPO, ACM owned 82.5 % of the outstanding ACM Shanghai shares. However, in May 2023, ACM's ownership declined to 82.1 % due to the exercise of 2,150,309 stock options related to ACM Shanghai shares. In February 2022, ACM Shanghai formed a wholly owned subsidiary in China, ACM Research (Beijing), Inc. (“ACM Beijing”), to perform sales, marketing and other business development activities. In March 2022, ACM formed a wholly owned subsidiary in Korea, Hanguk ACM CO., LTD, to perform business development and other related activities. In March 2022, the Board of Directors of ACM declared a 3 -for-1 stock split of Class A and Class B common stock effected in the form of a stock dividend (the “Stock Split”). Each stockholder of record at the close of business on March 16, 2022, received a dividend of two additional shares of Class A common stock for each then-held share of Class A common stock and two additional shares of Class B common stock for each then-held share of Class B common stock, which were distributed after the close of trading on March 23, 2022. Unless otherwise indicated, all share numbers, per share amount, share prices, exercise prices and conversion rates set forth in these notes and the accompanying consolidated financial statements have been adjusted retrospectively to reflect the Stock Split. In June 2023, ACM Shanghai formed a wholly-owned subsidiary in mainland China, Yusheng Micro Semiconductor (Shanghai), Co., Ltd, ("Yusheng Micro") to perform business development activities. In June 2023, Yusheng Micro together with Wooil Flucon Co. (note 14) and a private investor established ACM-Wooil Microelectronics (Shanghai) Co., Ltd, ("ACM-Wooil"), a partially owned subsidiary based in mainland China to develop and produce key components for the semiconductor equipment industry. 94 Table of Contents The Company has direct or indirect interests in the following subsidiaries: Place and date of incorporation Effective interest held as at December 31, Name of subsidiaries 2023 2022 ACM Research (Shanghai), Inc. Mainland China, May 2005 82.1 % 82.5 % ACM Research (Wuxi), Inc. Mainland China, July 2011 82.1 % 82.5 % CleanChip Technologies Limited Hong Kong, June 2017 82.1 % 82.5 % ACM Research Korea CO., LTD. Korea, December 2017 82.1 % 82.5 % ACM Research (Lingang), Inc. (1) Mainland China, March 2019 82.1 % 82.5 % ACM Research (CA), Inc. USA, April 2019 82.1 % 82.5 % ACM Research (Cayman), Inc. Cayman Islands, April 2019 100.0 % 100.0 % ACM Research (Singapore) PTE. Ltd. Singapore, August 2021 100.0 % 100.0 % ACM Research (Beijing), Inc. Mainland China, February 2022 82.1 % 82.5 % Hanguk ACM CO., LTD Korea, March 2022 100.0 % 100.0 % Yusheng Micro Semiconductor (Shanghai) Co., Ltd. Mainland China, June 2023 82.1 % - ACM-Wooil Microelectronics (Shanghai) Co., Ltd. Mainland China, June 2023 59.4 % - (1) ACM Research (Lingang) Inc., or ACM Lingang, is the English name referred to by its Chinese language name Shengwei Research (Shanghai), Inc. in prior filings. ACM Research (Lingang), Inc. and Shengwei Research (Shanghai), Inc. refer to the same entity. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The Company’s consolidated financial statements include the accounts of ACM and its subsidiaries, including ACM Shanghai and its subsidiaries. ACM’s subsidiaries are those entities in which ACM, directly and indirectly, controls more than a majority of the voting power. All significant intercompany transactions and balances have been eliminated upon consolidation. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) Use of Estimates The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet date and the reported revenues and expenses during the reported period in the condensed consolidated financial statements and accompanying notes. The Company’s significant accounting estimates and assumptions include, but are not limited to, those used for revenue recognition and deferred revenue, the valuation and recognition of fair value of certain short-term and long-term investments, stock-based compensation arrangements, realization of deferred tax assets, assessment for impairment of long-lived assets and long-term investments, allowance for credit losses, inventory valuation, useful lives of property, plant and equipment and useful lives of intangible assets. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates and assumptions. Common Stock Split All prior period share and per share amounts and common stock presented in the accompanying financial statements and these notes thereto has been retroactively adjusted to reflect the impact of the Stock Split. Proportional adjustments were also made to outstanding awards under the Company’s stock-based compensation plans. 95 Table of Contents Reclassifications Certain prior year amounts in the consolidated financial statements have been reclassified to conform with the current year presentation. These classifications had no impact on the Company’s results of operations. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and bank deposits that are unrestricted as to withdrawal and use, and highly liquid investments with an original maturity date of three months or less at the date of purchase. At times, cash deposits may exceed government-insured limits. The following table presents cash and cash equivalents, according to jurisdiction as of December 31, 2023 and 2022: December 31, 2023 2022 United States $ 43,614 $ 25,011 Mainland China 70,418 129,695 China Hong Kong 64,057 89,187 Korea 3,934 4,007 Singapore 67 51 Total $ 182,090 $ 247,951 The amounts in mainland China do not include short-term and long-term time deposits which totaled $ 121,342 and $ 172,448 at December 31, 2023 and 2022, respectively. Cash held in the U.S. exceeds the Federal Deposit Insurance Corporation (“FDIC”) insurance limits and is subject to risk of loss. No losses have been experienced to date. Cash amounts at the banks in mainland China are subject to a series of risk control regulatory standards from mainland China bank regulatory authorities. ACM’s subsidiaries in mainland China are required to obtain approval from the State Administration of Foreign Exchange (“SAFE”) to transfer funds into or out of mainland China. SAFE requires a valid agreement to approve the transfers, which are processed through a bank. Other than these mainland China foreign exchange restrictions, ACM’s subsidiaries in mainland China are not subject to any mainland China restrictions and limitations on its ability to transfer funds to ACM Research or among our other subsidiaries. However, cash held by ACM’s subsidiaries in mainland China does exceed applicable insurance limits and is subject to risk of loss, although no such losses have been experienced to date. ACM California periodically procures goods and services on behalf of ACM Shanghai. For these transactions, ACM Shanghai makes cash payments to ACM California in accordance with applicable transfer pricing arrangements. For the years ended December 31, 2023 and December 31, 2022, cash payments from ACM Shanghai to ACM California for the procurement of goods and services were $ 42.5 million and $ 30.2 million, respectively. ACM California periodically borrows funds for working capital advances from its direct parent, CleanChip. ACM California repays or renews these intercompany loans in accordance with their terms. For sales through CleanChip and ACM Research, a certain amount of sales or advance payments from customer proceeds is repatriated back to ACM Shanghai, a subsidiary, in accordance with applicable transfer pricing arrangements in the ordinary course of business. ACM Research provides services to certain customers located in the U.S., Europe and other regions outside of mainland China to support the evaluation of first tools and provide support for tools under warranty on behalf of ACM Shanghai. For these transactions, ACM Shanghai makes cash payments to ACM Research in accordance with applicable transfer pricing arrangements. For the year ended December 31, 2023, ACM Shanghai paid $ 19,200 in dividends to ACM Research. Subsequent to June 30, 2020, with the exception of sales and services-related transfer-pricing payments in the ordinary course of business, and dividends paid by ACM Shanghai to ACM Research, no cash transfers or other payments or distributions have been made between ACM Research and ACM Shanghai. ACM Research intends to retain any future 96 Table of Contents earnings to finance the operations and expenses of the business, and do not expect to distribute earnings or declare or pay any dividends in the foreseeable future. Amounts held in Korea exceed the Korea Deposit Insurance Corporation (“KDIC”) insurance limits and are subject to risk of loss. No losses have been experienced to date. There is no additional restriction for the transfer of cash from bank accounts in the U.S., Korea, Singapore, and Hong Kong. Time Deposits Time deposits are deposited with banks in mainland China with fixed terms and interest rates which cannot be withdrawn before maturity , and are presented as short-term deposits and long-term deposits in the consolidated financial statements based on their expected time of collection . They are also subject to the risk control regulatory standards described above upon maturity. Time deposits consisted of the following: December 31, 2023 2022 Deposit in China Merchant Bank which matured on January 29, 2023 with an annual interest rate of 2.25 % $ — $ 38,772 Deposit in China Everbright Bank which matured on January 29, 2023 with an annual interest rate of 2.25 % — 14,360 Deposit in China Everbright Bank which matured on May 22, 2023 with an annual interest rate of 5.07 % — 3,000 Deposit in China Industrial Bank which matured on January 30, 2023 with an annual interest rate of 2.15 % — 14,360 Deposit in China Merchant Bank which matured on January 29, 2024 with an annual interest rate of 2.85 % 29,797 28,720 Deposit in Bank of Ningbo which matured on February 17, 2024 with an annual interest rate of 2.85 % 44,630 43,080 Deposit in Shanghai Pudong Development Bank which matures on October 20, 2025 with an annual interest rate of 3.10 % 7,322 7,180 Deposit in Shanghai Pudong Development Bank which matures on November 14, 2025 with an annual interest rate of 3.10 % 7,307 7,180 Deposit in Shanghai Pudong Development Bank which matures on December 8, 2025 with an annual interest rate of 3.10 % 4,376 4,308 Deposit in Shanghai Pudong Development Bank which matures on December 15, 2025 with an annual interest rate of 3.10 % 4,373 4,308 Deposit in Shanghai Pudong Development Bank which matures on December 30, 2025 with an annual interest rate of 3.10 % 2,912 7,180 Deposit in China Industrial Bank which matures on January 30, 2026 with an annual interest rate of 3.15 % 14,528 — Deposit in China Everbright Bank which matured on January 5, 2024 with an annual interest rate of 5.38 % 3,079 — Deposit in China Everbright Bank which matures on May 22, 2024 with an annual interest rate of 5.38 % 3,018 — $ 121,342 $ 172,448 For the years ended December 31, 2023 and 2022, respectively, interest income related to time deposits wa s $ 3,689 and $ 3,472 , respectively. 97 Table of Contents Accounts Receivable Prior to adoption of Accounting Standards Update, or ASU, 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”), the Company reviews its accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. After adoption of ASC 326, as of January 1, 2023, the Company assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when the Company identifies specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status, the age of the accounts receivable balances, credit quality of the Company’s customers based on ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers. At December 31, 2023, and 2022, the Company, based on a review of its outstanding balances and its customers, determined the allowance for credit losses were $ 4,830 and $ 0 , respectively. Land Use Right, Net The land use right represents the cost to purchase a right to use state-owned land in mainland China with lease terms of 50 years expiring in 2070, for which an upfront lump-sum payment was made during the year ended December 31, 2021. The land use rights are treated as operating lease. The Company classifies the land use right as non-current assets on the consolidated balance sheets (note 7). Inventory Inventory consists of raw materials and related goods, work-in-progress, finished goods, and other consumable materials such as spare parts. Inventory was recorded at the lower of cost or net realizable value at December 31, 2023 and 2022. • The cost of a general inventory item is determined using the moving weighted average method. The cost of an inventory item purchased specifically for a customized product is determined using the specific identification method. Low-cost consumable materials and packaging materials are expensed as incurred. • Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete or dispose. The Company assesses the recoverability of all inventories quarterly to determine if any adjustments are required. Potential excess or obsolete inventory is written down b ased on management’s analysis of inventory levels and estimates of future 12-month demand and market conditions. Property, Plant and Equipment, Net Property, plant and equipment are recorded at cost less accumulated depreciation and any provision for impairment in value. Depreciation begins when the asset is placed in service and is calculated by using the straight-line method over the estimated useful life of an asset (or, if shorter, over the lease term). Betterments or renewals are capitalized when incurred. Estimated useful lives of assets are as follows: Buildings and plants 30 years Computer and office equipment 3 to 5 years Furniture and fixtures 5 years Leasehold improvements shorter of lease term or estimated useful life Electronic equipment 3 to 5 years Manufacturing equipment for small to medium-sized equipment, 5 to 10 years; for large equipment, estimated by purchasing department at time of acceptance Transportation equipment 4 to 5 years 98 Table of Contents Expenditures for maintenance and repairs that neither materially add to the value of the property nor appreciably prolong the life of the property are charged to expense as incurred. Upon retirement or sale of an asset, the cost of the asset and the related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is credited or charged to income. Intangible Assets, Net Intangible assets consist of purchase software. Assets are valued at cost at the time of acquisition and are amortized over their beneficial periods. Valuation of Long-Lived Assets Long-lived assets are evaluated for impairment whenever events or changes in circumstance indicate that the carrying value of the assets may not be fully recoverable or that the useful life of the assets is shorter than the Company had originally estimated. When these events or changes occur, the Company evaluates the impairment of the long-lived assets by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Company recognizes an impairment loss based on the excess of the carrying value over the fair value. No impairment charge was recognized for either of the periods presented. Leases The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, and operating lease liabilities in the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term. Revenue Recognition The Company derives revenue principally from the sale of semiconductor capital equipment. Revenue from contracts with customers is recognized using the following five steps pursuant ASC Topic 606, Revenue from Contracts with Customers : 1. Identify the contract(s) with a customer; 2. Identify the performance obligations in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations in the contract; and 5. Recognize revenue when (or as) the entity satisfies a performance obligation. Identify the contract(s) with a customer. The Company generally considers written documentation including, but not limited to, signed purchase orders, master agreements, and sales orders as contracts, provided it has approval and commitment from the customer, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collection is probable. Collectability is assessed based on management’s assessment of the customer’s creditworthiness, historical payment experience, as well as other relevant factors. Identify the performance obligations in the contract. Performance obligations are accounted for separately if they are distinct. A good or service is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and the good or service is distinct in the context of the contract. The Company’s performance obligations generally include sales of tools and spare parts. In addition, customer contracts can contain provisions for installation, training, software updates, most-favored pricing for spare parts, and other items which have been deemed immaterial in the context of the contract. 99 Table of Contents Determine the transaction price. The transaction price for the Company’s contracts with customers may include fixed and variable consideration. The Company includes variable consideration in the transaction price to the extent that it is probable that a significant reversal of revenue will not occur in the future based on the Company’s historical experience with similar arrangements. Allocate the transaction price to the performance obligations in the contract. For contracts that contain multiple performance obligations, the Company allocates the transaction price to the performance obligations on a relative standalone selling price basis. The Company defers revenue associated with spare parts, sold together with its tools, based on its stand-alone observable selling prices or using an expected cost-plus-margin approach when a stand-alone selling price is not directly observable, and recognizes revenue upon subsequent delivery. Recognize revenue when, or as, a performance obligation is satisfied . The Company recognizes revenue from tools and spare parts at a point in time, when the Company has satisfied its performance obligation. The Company’s sales arrangements do not include a general right of return. For shipments made to a customer that has not previously accepted a specific type of tool (“first tools”), revenues are recognized when the tools are accepted by the customer. For shipments made to a customer that has previously accepted a specific type of tool ("repeat shipment"), revenues are recognized upon shipment or delivery because the Company can objectively demonstrate that the tools meet all the required customer specifications. The Company’s warranties provide assurance that its products will function as expected and in accordance with certain specifications. The Company’s warranties are intended to safeguard the customer against existing defects and do not provide any incremental service to the customer. They are not separate performance obligations and are accounted for under FASB ASC Topic 460, Guarantees . Contract liabilities include payments received from customers prior to the transfer of control of certain goods which are recorded as advances from customers, and spare parts sold together with its tools which are recorded as deferred revenue. The Company does not have contract assets. Cost of Revenue Cost of revenue primarily consists of: direct materials, comprised principally of parts used in assembling equipment, together with crating and shipping costs; direct labor, including salaries and other labor related expenses attributable to the Company’s manufacturing department; allocated overhead cost, such as personnel cost, depreciation expense, expenses associated with supply chain management and quality assurance activities, inventory provision, as well as shipping insurance premiums. Research and Development Costs Research and development costs relating to the development of new products and processes, significant improvements and refinements to existing products or the process of supporting customer evaluations of tools, and the development of new tools for evaluation by customers during the product demonstration process, are expensed as incurred. Shipping and Handling Costs Shipping and handling costs, which relate to transportation of products to customer locations, are charged to selling and marketing expense. For the years ended December 31, 2023, 2022 and 2021, shipping and handling costs included in sales and marketing expenses were $ 1,582 , $ 1,507 , and $ 923 , respectively. Borrowing Costs Borrowing costs attributable directly to the acquisition, construction or production of qualifying assets that require a substantial period of time to be ready for their intended use or sale are capitalized as part of the cost of those assets. Income earned on temporary investments of specific borrowings pending their expenditure on those assets is deducted from borrowing costs capitalized. All other borrowing costs are recognized in interest expense in the consolidated statements of comprehensive income (loss) in the period in which they are incurred. 100 Table of Contents Warranty For each of its products, the Company generally provides a standard assurance type warranty ranging from 12 to 36 months and covering replacement of the product during the warranty period. The Company accounts for the estimated warranty costs at the time revenue is recognized. Warranty obligations are affected by historical failure rates and associated replacement costs. Utilizing historical warranty cost records, the Company calculates a rate of warranty expenses to revenue to determine the estimated warranty charge. The Company updates these estimated charges on a regular basis. Warranty obligations are included in other payables and accrued expenses in the consolidated balance sheets. The following table shows changes in the Company’s warranty obligations for the years ended December 31, 2023, 2022 and 2021, respectively. Year Ended December 31, 2023 2022 2021 Balance at beginning of period $ 8,780 $ 6,631 $ 3,975 Additions 7,969 5,379 5,026 Utilized ( 6,915 ) ( 3,230 ) ( 2,370 ) Balance at end of period $ 9,834 $ 8,780 $ 6,631 Government Subsidies ACM Shanghai has received seven special government grants. The governmental grants contain certain operating conditions, and the Company is required to go through a government due diligence process once the project is complete. Unearned government subsidies received are deferred and recorded as other long-term liabilities (note 13) in the consolidated balance sheet until the criteria for such recognition are satisfied. Grant amounts are recognized in our statements of comprehensive income (loss) as follows: • Government subsidies relating to current expenses are recorded as reductions of those expenses in the periods in which the current expenses are recorded. For the years ended December 31, 2023, 2022, and 2021, related government subsidies recognized as reductions of relevant expenses in the consolidated statements of comprehensive income (loss) were $ 1,740 , $ 1,201 and $ 11,260 , respectively. • Government subsidies related to depreciable assets are credited to income over the useful lives of the related assets for which the grant was received. For the years ended December 31, 2023, 2022, and 2021, related government subsidies recognized as other income in the consolidated statements of comprehensive income (loss) w ere $ 533 , $ 306 , an d $ 200 , respectively. Stock-based Compensation ACM and ACM Shanghai grants stock options to employees and non-employee consultants and directors and accounts for those stock-based awards in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. Stock-based awards granted to employees and non-employee consultants and directors are measured at the fair value of the awards on the grant date and are recognized as expenses either (a) immediately on grant, if no vesting conditions are required or (b) using the graded vesting method, net of estimated forfeitures, over the requisite service period. The fair value of stock options is determined using the Black-Scholes valuation model when there are service and performance condition attached or the Monte Carlo valuation model when there is market condition attached. Stock-based compensation is charged to the category of operating expense corresponding to the service function of the employees and non-employee consultants and directors. Income Taxes The Company accounts for income taxes using the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable values. 101 Table of Contents In evaluating the ability to recover its deferred income tax assets, the Company considers all available positive and negative evidence, including its operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. In the event the Company determines that it would be able to realize its deferred income tax assets in the future in excess of their net recorded amount, it would make an adjustment to the valuation allowance that would reduce the provision for income taxes. Conversely, in the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made. Tax benefits related to uncertain tax positions are recognized when it is more likely than not that a tax position will be sustained during an audit. Interest and penalties related to unrecognized tax benefits are included within the provision for income tax. Basic and Diluted Net Income per Share of Common Stock Basic and diluted net income per share of common stock is calculated as follows: Year Ended December 31, 2023 2022 2021 Numerator: Net income $ 96,852 $ 50,564 $ 42,921 Less: Net income attributable to non-controlling interests 19,503 11,301 5,164 Net income available to common stockholders, basic $ 77,349 $ 39,263 $ 37,757 Less: Dilutive effect arising from stock-based awards by ACM Shanghai 1,841 584 108 Net income available to common stockholders, diluted $ 75,508 $ 38,679 $ 37,649 Weighted average shares outstanding, basic (1) 60,164,670 59,235,975 57,654,708 Effect of dilutive securities 4,705,873 6,105,796 7,702,008 Weighted average shares outstanding, diluted 64,870,543 65,341,771 65,356,716 Net income per share of common stock: Basic $ 1.29 $ 0.66 $ 0.65 Diluted $ 1.16 $ 0.59 $ 0.58 (1) The results for 2021 have been adjusted to reflect the three -for-one stock split effected in the form of a stock dividend in March 2022. See Note 2 for details. Basic and diluted net income per share of common stock is presented using the two-class method, which allocates undistributed earnings to common stock and any participating securities according to dividend rights and participation rights on a proportionate basis. Under the two-class method, basic net income per share of common stock is computed by dividing the sum of distributed and undistributed earnings attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. ACM did not have any participating securities outstanding during the three-year periods ending December 31, 2023. ACM has been authorized to issue Class A and Class B common stock since redomesticating in Delaware in November 2016. The two classes of common stock are substantially identical in all material respects, except for voting rights. Since ACM did not declare any dividends during the years ended December 31, 2023, 2022 and 2021, the net income per share of common stock attributable to each class is the same under the “two-class” method. As such, the two classes of common stock have been presented on a combined basis in the consolidated statements of comprehensive income (loss) and in the above computation of net income per share of common stock. Diluted net income per share of common stock reflects the potential dilution from securities, including stock options, that could share in ACM’s earnings. Certain potential dilutive securities were excluded from the net income per share calculation because the impact would be anti-dilutive. The number of potentially dilutive shares that were not included in 102 Table of Contents the calculation of diluted net income per share in the periods presented where their inclusion would be anti-dilutive were 3,651,337 , 1,795,340 and 98,800 the years ended December 31, 2023, 2022, and 2021, respectively. Comprehensive Income (loss) The Company applies FASB ASC Topic 220, Comprehensive Income , which establishes standards for the reporting and display of comprehensive income or loss, requiring its components to be reported in a financial statement with the same prominence as other financial statements. The Company’s comprehensive income (loss) includes net income and foreign currency translation adjustments and is presented in the consolidated statements of comprehensive income (loss). Statutory Surplus Reserve The income of ACM’s mainland China subsidiaries is distributable to their shareholders after transfers to reserves as required under relevant mainland China laws and regulations and the subsidiaries’ Articles of Association. As stipulated by the relevant laws and regulations in mainland China, mainland China subsidiaries are required to maintain reserves, including reserves for statutory surpluses and public welfare funds that are not distributable to shareholders. A mainland China subsidiary’s appropriations to the reserves are approved by its board of directors. At least 10% of annual statutory after-tax profits, as determined in accordance with mainland China accounting standards and regulations, is required to be allocated to the statutory surplus reserves. If the cumulative total of the statutory surplus reserves reaches 50% of a mainland China subsidiary’s registered capital, any further appropriation is optional. Statutory surplus reserves may be used to offset accumulated losses or to increase the registered capital of a mainland China subsidiary, subject to approval from the relevant mainland China authorities, and are not available for dividend distribution to the subsidiary’s shareholders. The mainland China subsidiaries are prohibited from distributing dividends unless any losses from prior years have been offset. Except for offsetting prior years’ losses, however, statutory surplus reserves must be maintained at a minimum of 25% of share capital after such usage. ACM Shanghai estimated a statutory surplus reserve of $ 30,060 and $ 16,881 based on an accumulated profit as of December 31, 2023 and 2022, respectively, which is included in the statutory surplus reserve in the consolidated balance sheets. Noncontrolling interests A noncontrolling interest is recognized to reflect the portion of subsidiaries’ equity which is not attributable, directly or indirectly, to ACM Research. Consolidated net income on the consolidated statements of comprehensive income (loss) includes the net income attributable to noncontrolling interests. The cumulative results of operations attributable to noncontrolling interests are recorded as “noncontrolling interests” in the Company’s consolidated balance sheets. Financial Instruments The Company periodically invests in equity securities, and maintains an investment portfolio of various holdings, types, and maturities. For equity investments that do not have a readily determinable fair value, the Company classified them as long-term investments, and records them using either: 1) the measurement alternative which measures the equity investments at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes; or 2) the equity method whereby the Company recognizes its proportional share of the income or loss from the equity method investment. The equity method is utilized when the equity investments are common stock or in substance common stock, and the Company does not have the ability to control the investee but is deemed to have the ability to exercise significant influence over the investee’s operating or financial policies. For equity investments that have a readily determinable fair value, the Company classified them as short-term investments, and records them at fair market value on a recurring basis based upon quoted market prices. Realized and unrealized gains and losses resulting from application of the measurement alternative, the impact of the application of the equity method to the Company’s equity investments, and recognition of changes in fair market value, as applicable, are recognized as non-operating income (expenses), net in the co ndensed consolidated statements of comprehensive income (loss). The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability. 103 Table of Contents A fair value hierarchy has been established that prioritizes the inputs to valuation techniques used to measure fair value. The level of an asset or liability in the hierarchy is based on the lowest level of input that is significant to the fair value measurement. Assets and liabilities carried at fair value are classified and disclosed in one of the following three categories: Level 1: Valuations based on quoted prices in active markets for identical assets or liabilities with sufficient volume and frequency of transactions. Level 2: Valuations based on observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active for identical assets or liabilities, or model-derived valuations techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3: Valuations based on unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities and based on non-binding, broker-provided price quotes and may not have been corroborated by observable market data. The Company’s primary financial instruments include its cash, cash equivalents, short term and long term deposits, restricted cash, short-term and long-term investments, accounts receivable, other receivables, accounts payable, and short-term and long-term borrowings. The estimated fair value of cash and cash equivalents, restricted cash, short-term time deposits, accounts receivable, other receivable, accounts payable, and short-term borrowings approximates their carrying value due to the short period of time to their maturities. All transfers between fair value hierarchy levels are recognized by the Company at the end of each reporting period. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement in its entirety, requires judgment and considers factors specific to the investment. The inputs or methodology used for valuing financial instruments are not necessarily an indication of the risks associated with investment in those instruments. Assets and liabilities measured at fair value on a recurring basis: Quoted Prices in Active Markets for Identical Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total As of December 31, 2023 Assets Cash and cash equivalents $ 182,090 $ - $ - $ 182,090 Short-term investments 21,312 - - 21,312 $ 203,402 $ - $ - $ 203,402 As of December 31, 2022 Assets Cash and cash equivalents $ 247,951 $ - $ - $ 247,951 Short-term investments 20,209 - - 20,209 $ 268,160 $ - $ - $ 268,160 Assets and liabilities measured at fair value on a non-recurring basis: 104 Table of Contents Quoted Prices in Active Markets for Identical Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total As of December 31, 2023 Assets Investments accounted for using measurement alternative $ — $ — $ 10,378 $ 10,378 $ — $ — $ 10,378 $ 10,378 The Company did not have any assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2022 . The non-recurring fair value measurements to the carrying amount of equity investments accounted for using measurement alternative usually requires management to estimate a price adjustment for the different rights and obligations between a similar instrument of the same issuer with an observable price change in an orderly transaction and the investment held by the Company. These non-recurring fair value measurements were measured by using the observable transaction price and other unobservable inputs (level 3) as of the observable transaction dates. Refer to Note 12 for fair value information related to the Company’s outstanding long-term borrowings as of December 31, 2023 and December 31, 2022 . Operating and Financial Risks Concentration of Credit Risk Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents, time deposits, and accounts receivable. The Company deposits and invests its cash with financial institutions that management believes are creditworthy. The Company is potentially subject to concentrations of credit risks in its accounts receivable and revenue. For the years ended December 31, 2023, 2022 and 2021 three customers accounted for 45.5 %, three customers accounted for 43.8 % of revenue, and two customers accounted for 48.9 %, of revenue, respectively. As of December 31, 2023 and 2022 four customers accounted for 59.1 % and two customers accounted for 42.6 %, respectively, of the Company’s accounts receivables. The Company believes that the receivable balances from these largest customers do not represent a significant credit risk based on past collection experience. Interest Rate Risk As of December 31, 2023 and 2022, the balance of the Company’s short term bank borrowings (note 9) were scheduled to mature at various dates within the following year and thus exposed the Company to modest interest rate risk. As of December 31, 2023, the Company’s long-term borrowings (note 12) carry a fixed interest rate, and the Company may be exposed to the fair value interest rate risk. Liquidity Risk The Company’s working capital at December 31, 2023 and 2022 was sufficient to meet its then-current requirements. The Company may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions the Company decides to pursue. In the long run, the Company intends to rely primarily on cash flows from operations and additional borrowings from financial institutions in order to meet its cash needs. If those sources are insufficient to meet cash requirements, the Company may seek to issue additional debt or equity. 105 Table of Contents Country Risk The Company has significant investments in mainland China. The operating results of the Company may be adversely affected either directly or indirectly by changes in the political and social conditions in mainland China, by changes in mainland China government policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, rates and methods of taxation, and export controls enacted by the U.S., Japan, and the Netherlands to restrict the sale of certain technology to mainland China, among other things. Foreign Currency Risk and Translation The Company’s consolidated financial statements are presented in U.S. dollars, which is the Company’s reporting currency, while the functional currency of ACM’s subsidiaries in mainland China and Korea are the Chinese Renminbi (“RMB”), and the Korean Won, respectively. Changes in the relative values of U.S. dollars and RMB affect the Company’s reported levels of revenues and profitability as the results of its operations are translated from RMB into U.S. dollars for reporting purposes. Since the Company has not engaged in any hedging activities, it cannot predict the impact of future exchange rate fluctuations on the results of its operations, and it may experience economic losses as a result of foreign currency exchange rate fluctuations. Transactions of ACM’s subsidiaries involving foreign currencies are recorded in functional currency according to the rate of exchange prevailing on the date when the transaction occurs. The ending balances of the Company’s foreign currency accounts are converted into functional currency using the rate of exchange prevailing at the end of each reporting period. Net gains and losses resulting from foreign exchange fluctuations as marked to market at year-end are included in the consolidated statements of comprehensive income (loss). In accordance with FASB ASC Topic 830, Foreign Currency Matters , the Company translates assets and liabilities into U.S. dollars from RMB or Korean Won using the rate of exchange prevailing at the applicable balance sheet date and the consolidated statements of comprehensive income (loss) and consolidated statements of cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation are recorded in stockholders’ equity as part of accumulated other comprehensive income (loss). Recently Adopted Accounting Pronouncements In June 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”). ASC 326 replaced the pre-existing incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASC 326 requires use of a forward-looking expected credit loss model for accounts receivables, loans and other financial instruments. In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates. ASU 2019-10 defers the effective date of ASU 2016-13 for public filers that are considered small reporting companies (“SRC”) as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Since the Company was eligible to be a SRC based on its SRC determination as of November 15, 2019 (which was the issuance date of ASU 2019-10) in accordance with SEC regulations, the Company adopted amendments in ASC 326 for the year beginning January 1, 2023. Adoption of the standard requires using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date to align existing credit loss methodology with the new standard. The cumulative-effect adjustment, net of tax impact, to retained earnings as of January 1, 2023 was $( 1,769 ). In June 2022, the FASB issued ASU 2022-03— Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”) which clarifies how the fair values of equity securities subject to contractual sale restrictions is determined (Topic 820). The amendment clarifies that a contractual sale restriction should not be considered in measuring fair value. It also requires certain qualitative and quantitative disclosures related to equity securities subject to contractual sale restrictions. The new guidance is required to be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. This guidance is effective for the Company for fiscal year beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted. The Company early adopted ASU 2022-03 in the third quarter of 2023, and the adoption did not have a material impact on the Company’s financial position, results of operations and cash flows. 106 Table of Contents Recently issued accounting pronouncements not yet adopted In November 2023, the FASB issued ASU No. 2023-07, Improvements to Reportable Segment Disclosures . This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. The Company is currently evaluating the provisions of this ASU and expect to adopt it for the year ending December 31, 2024. In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Retrospective application is permitted. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the provisions of this ASU. NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS The Company assesses revenues based upon the nature or type of goods or services it provides and the geographic location of the customer facility. The following tables present disaggregated revenue information: Year Ended December 31, 2023 2022 2021 Single Wafer Cleaning, Tahoe and Semi-Critical Cleaning Equipment $ 403,851 $ 272,939 $ 189,208 ECP (front-end and packaging), Furnace and Other Technologies 103,356 77,482 33,210 Advanced Packaging (excluding ECP), Services & Spares 50,516 38,411 37,333 Total Revenue By Product Category $ 557,723 $ 388,832 $ 259,751 Year Ended December 31, 2023 2022 2021 Mainland China $ 540,969 $ 377,752 $ 258,615 Other regions 16,754 11,080 1,136 $ 557,723 $ 388,832 $ 259,751 Below are the accounts receivables and contract liabilities balances as of: December 31, 2023 December 31, 2022 Accounts receivable $ 283,186 $ 182,936 Advances from customers 181,368 153,773 Deferred revenue 3,687 4,174 During the year ended December 31, 2023, advances from customers increased by $ 27,595 primarily due to a net increase of payments made by customers for first tools under evaluation. 107 Table of Contents Below are revenues recognized from amounts included in contract liabilities at the beginning of the year: Year Ended December 31, 2023 2022 2021 Revenue recognized from amounts included in contract liabilities at the beginning of the year $ 97,370 $ 30,385 $ 13,425 NOTE 4 – ACCOUNTS RECEIVABLE At December 31, 2023 and 2022, accounts receivable consisted of the following: December 31, 2023 2022 Accounts receivable $ 288,016 $ 182,936 Less: Allowance for credit losses ( 4,830 ) - Total $ 283,186 $ 182,936 The $ 100,250 increase in accounts receivable for the year ended December 31, 2023 corresponds to a $ 168,891 increase in revenue for the same period. December 31, 2023 2022 Cumulative effect of change in accounting principle under ASC 326, before tax, as of January 1, 2023 $ ( 2,099 ) $ — Provision for credit loss ( 2,731 ) — Allowance for credit losses, before tax, as of December 31, 2023 $ ( 4,830 ) $ — The Company assesses collectability by reviewing accounts receivable on a general basis where similar characteristics exist and on an individual basis when the Company identifies specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status, the age of the accounts receivable balances, credit quality of the Company’s customers based on ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers. As a result of the Company’s adoption of ASC 326 as of January 1, 2023 (Note 2), the Company recorded an allowance for credit losses as of December 31, 2023, as compared to no allowance for credit losses as of December 31, 2022. NOTE 5 – INVENTORIES At December 31, 2023 and 2022, inventory consisted of the following: December 31, 2023 2022 Raw materials $ 235,062 $ 167,135 Work-in-process 81,438 79,126 Finished goods 228,895 146,911 Total inventory $ 545,395 $ 393,172 At December 31, 2023 and December 31, 2022, the value of finished goods inventory, which is comprised of first-tools at customer physical locations, for which customers were contractually obligated to take ownership upon acceptance, totaled $ 123,390 and $ 123,169 , respectively. 108 Table of Contents The $ 70,239 increase in raw materials and work-in-process inventory at December 31, 2023 compared to December 31, 2022 was due to additional purchase of supplies to support a higher level of expected total shipments for the next several quarters, and to reduce the risk of supply chain delays to meet anticipated customer demand for the Company’s products. The $ 81,984 increase in finished goods inventory at December 31, 2023 compared to December 31, 2022 reflects a higher value of completed tools at the Company's facilities, and a higher value of first-tools under evaluation by existing or prospective customers, due to shipments made, net of customer acceptances during the period. The Company’s products each require a certain degree of customization, and the substantial majority of the work-in-process inventory and finished goods inventory is built to meet a specific customer order for repeat shipment or first tool delivery. At the end of each period, the Company assesses the status of each item in work-in-process and finished goods inventory. The Company recognizes a loss or impairment if in management’s judgement the inventory cannot be sold or used for production, if it has been damaged or should be considered as obsolete, or if the net realizable value is lower than the cost. At the end of each period, the Company also assesses the status of its raw materials. The Company recognizes a loss or impairment for any raw materials aged more than three years . The three-year aging is based on the Company’s assessment of technology change, its requirement to maintain stock for warranty coverage, and other factors. During the years ended December 31, 2023, 2022, and 2021, provision for i nventory of $ 575 , $ 2,248 , and $ 75 were recognized in cost of revenue, respectively. Write-downs were due to an internal assessment that certain inventory could not be sold or used for production due to damage or obsolescence. NOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET At December 31, 2023 and 2022, property, plant and equipment consisted of the following: December 31, 2023 2022 Buildings and plants $ 83,109 $ 35,864 Manufacturing equipment 16,556 9,298 Office equipment 4,953 3,691 Transportation equipment 404 407 Leasehold improvement 7,889 7,173 Total cost 112,911 56,433 Less: Total accumulated depreciation and amortization ( 17,503 ) ( 10,047 ) Construction in progress 106,440 36,489 Total property, plant and equipment, net $ 201,848 $ 82,875 Depreciation expense was $ 6,912 , $ 4,839 , and $ 2,099 for the years ended December 31, 2023, 2022, and 2021, respectively. Buildings and plants represent Lingang housing property owned by ACM Shengwei at a value of RMB 249,746 ($ 35,264 ) as of December 31, 2023, and facilities for the new headquarters of ACM Shanghai ("Zhangjiang New Building") at a value of RMB 338,848 ($ 47,845 ) as of December 31, 2023. The Lingang housing property is pledged as security for loans from China Merchants Bank (Note 12). Construction in progress primarily reflects costs incurred related to the construction of ACM Shanghai’s Lingang development and production center, and is scheduled to begin production in 2024. 109 Table of Contents NOTE 7 – LAND USE RIGHT, NET A summary of land use right is as follows: December 31, 2023 2022 Land use right purchase amount $ 8,996 $ 9,149 Less: accumulated amortization ( 629 ) ( 457 ) Land use right, net $ 8,367 $ 8,692 The amortization for the years ended December 31, 2023, 2022 and 2021 was $ 181 , $ 189 and $ 199 , respectively. The annual amortization of land use right for each of the five succeeding years is as follows: Year ending December 31, 2024 $ 180 2025 180 2026 180 2027 180 2028 180 2029 and thereafter 7,467 Total $ 8,367 NOTE 8 – OTHER LONG-TERM ASSETS At December 31, 2023 and 2022, other long-term assets consisted of the following: December 31, 2023 2022 Prepayment for property, plant and equipment $ 3,380 $ 704 Lease deposit 834 393 Security deposit for land use right 696 708 Prepayment for property - Zhangjiang New Building — 47,251 Others 1,140 1,209 Total other long-term assets $ 6,050 $ 50,265 Prepayment for property - Zhangjiang New Building is for the new corporate headquarters of ACM Shanghai. Pursuant to contractual agreements, ownership of Zhangjiang New Building was transferred to ACM Shanghai in February 2023 at valu e of RMB 338,848 ($ 47,201 ). U pon the transfer of ownership, Prepayment for property - Zhangjiang New Building was reclassified to property, plant and equipment (Note 6). NOTE 9 – SHORT-TERM BORROWINGS At December 31, 2023 and December 31, 2022, short-term borrowings consisted of the following: December 31, 2023 2022 Line of credit up to RMB 150,000 from China Everbright Bank, 1)due on August 17, 2023 with an annual interest rate of 3.40 %. — 8,616 2)due on September 1, 2023 with an annual interest rate of 3.60 %. — 8,616 110 Table of Contents 3)due on December 16, 2023 with an annual interest rate of 3.00 % - 4,308 4)due on August 29,2024 with an annual interest rate of 3.00 %. 2,463 - Line of credit up to RMB 100,000 from Bank of Communications, 1)due on August 11, 2023 with an annual interest rate of 3.60 %. — 8,616 2)due on September 5, 2023 with an annual interest rate of 3.50 %. — 5,744 Line of credit up to RMB 40,000 from Bank of China, 1)due on August 26, 2023 with an annual interest rate of 3.15 %. — 5,744 Line of credit up to RMB 40,000 from Bank of China, 1)due on September 7, 2024 with an annual interest rate of 2.87 % 5,648 — Line of credit up to RMB 100,000 from China Merchants Bank, 1)due on July 21, 2023 with an annual interest rate of 3.50 % — 1,292 2)due on July 27, 2023 with an annual interest rate of 3.50 % — 1,292 3)due on August 1, 2023 with an annual interest rate of 3.50 % — 1,292 4)due on August 3, 2023 with an annual interest rate of 3.50 % — 1,292 5)due on August 7, 2023 with an annual interest rate of 3.50 % — 1,293 6)due on August 14, 2023 with an annual interest rate of 3.50 % — 1,293 7)due on August 15, 2023 with an annual interest rate of 3.50 % — 1,293 8)due on August 21, 2023 with an annual interest rate of 3.50 % — 1,005 9)due on August 28, 2023 with an annual interest rate of 3.50 % — 1,292 10)due on September 13, 2023 with an annual interest rate of 3.50 % — 1,292 11)due on September 20, 2023 with an annual interest rate of 3.50 % — 1,293 12)due on October 7, 2023 with an annual interest rate of 3.50 % — 431 Line of credit up to RMB 200,000 from China Merchants Bank, 1)due on August 7,2024 with an annual interest rate of 3.00 %. 1,271 - 2)due on August 8,2024 with an annual interest rate of 3.00 %. 1,271 - 3)due on August 9,2024 with an annual interest rate of 3.00 %. 1,271 - 4)due on August 14,2024 with an annual interest rate of 3.00 %. 1,271 - 5)due on August 17,2024 with an annual interest rate of 3.00 %. 1,271 - 6)due on August 20,2024 with an annual interest rate of 3.00 %. 1,271 - 7)due on August 21,2024 with an annual interest rate of 3.00 %. 1,271 - 8)due on August 22,2024 with an annual interest rate of 3.00 %. 1,271 - 9)due on August 24,2024 with an annual interest rate of 3.00 %. 1,271 - 10)due on August 27,2024 with an annual interest rate of 3.00 %. 1,271 - 11)due on August 29,2024 with an annual interest rate of 3.00 %. 1,271 - 12)due on August 30,2024 with an annual interest rate of 3.00 %. 1,271 - 13)due on September 3,2024 with an annual interest rate of 3.00 %. 1,271 - 14)due on September 5,2024 with an annual interest rate of 3.00 %. 1,270 - 15)due on September 6,2024 with an annual interest rate of 3.00 %. 1,270 - 16)due on September 10,2024 with an annual interest rate of 3.00 %. 1,270 - 17)due on September 12,2024 with an annual interest rate of 3.00 %. 1,270 - Line of credit up to KRW 500,000 from Industrial Bank of Korea, 1)due on July 12,2024 with an annual interest rate of 6.03 %. 77 - Line of credit up to KRW 2,000,000 from Industrial Bank of Korea, 111 Table of Contents 1)due on December 15,2024 with an annual interest rate of 4.27 %. 1,544 - Total $ 31,335 $ 56,004 For the years ended December 31, 2023, 2022 and 2021, interest expense related to short-term borrowings amounted to $ 1,581 , $ 810 , and $ 700 , respectively. NOTE 10 – OTHER PAYABLES AND ACCRUED EXPENSES At December 31, 2023 and 2022, other payables and accrued expenses consisted of the following: December 31, 2023 2022 Accrued commissions $ 15,572 $ 14,890 Accrued warranty 9,834 8,780 Accrued payroll 14,840 12,201 Accrued professional fees 696 724 Accrued machine testing fees 1,762 1,215 Accrued machine sales fees 6,010 5,874 Accrued Lingang construction fees 33,729 738 Others 20,508 7,779 Total $ 102,951 $ 52,201 NOTE 11 – LEASES The Company leases space under non-cancelable operating leases for several office and manufacturing locations. These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives, or other build-out clauses. Further, the leases do not contain contingent rent provisions. Most leases include one or more options to renew. The Company regularly evaluates the renewal options, and when they are reasonably certain of exercise, the Company includes the renewal period in its lease term. The components of lease expense were as follows: Year Ended December 31, 2023 2022 2021 Operating lease cost $ 3,580 $ 2,816 $ 2,451 Short-term lease cost 923 786 394 Lease cost $ 4,503 $ 3,602 $ 2,845 Supplemental cash flow information related to operating leases was as follows for the years ended December 31, 2023, 2022, and 2021: Year Ended December 31, 2023 2022 2021 Operating cash outflow from operating leases $ 3,580 $ 2,816 $ 2,451 Operating lease right-of-use assets obtained in exchange for new operating lease liabilities $ 8,195 $ 1,054 $ 1,818 112 Table of Contents Maturities of lease liabilities for all operating leases were as follows as of December 31, 2023: December 31, 2024 $ 3,016 2025 1,767 2026 1,207 2027 1,150 2028 and thereafter 595 Total lease payments $ 7,735 Less: Interest ( 709 ) Present value of lease liabilities $ 7,026 The weighted average remaining lease terms and discount rates for all operating leases were as follows as of December 31, 2023 and 2022: December 31, 2023 2022 Remaining lease term and discount rate: Weighted average remaining lease term (years) 3.44 2.00 Weighted average discount rate 3.91 % 4.25 % NOTE 12 – LONG-TERM BORROWINGS At December 31, 2023 and 2022, long-term borrowings consisted of the following: December 31, 2023 2022 Loan from China Merchants Bank $ 13,362 $ 15,265 Loans from Bank of China 5,013 5,744 Loan from Bank of Shanghai 14,120 — Loans from China CITIC Bank 28,240 — Less: Current portion ( 6,783 ) ( 2,322 ) $ 53,952 $ 18,687 The loan from China Merchants Bank is for the purpose of purchasing property in Lingang, Shanghai. The loan is repayable in 120 installments with the last installment due in November 2030, with an annual interest rat e of 4.65 %. Th e loan is pledged by the property of ACM Shengwei and guaranteed by ACM Shanghai. Two loans from Bank of China are for the purpose of funding ACM Shanghai project expenditures. The loans bear interest at an annual rate of 2.6 % and are repayable in 6 installments, with the last installments due in June 2024 and September 2024. The loan from Bank of Shanghai is for the purpose of funding ACM Shanghai project expenditures. The loan bears interest at an annual rate of 2.85 %, and will be fully repaid in April 2025. The first loan from China CITIC Bank is for the purpose of funding ACM Shanghai project expenditures. The loan bears interest at an annual rate of 3.40 % and are repayable in 4 installments, with the last installment due in August 2025. 113 Table of Contents The second loan from China CITIC bank is for the purpose of funding ACM's general corporate expenses and working capital. The loan bears interest at an annual rate of 4.50 % payable quarterly, and the principal amount is repayable in 4 installments, with the last installment due in December 2025. As of December 31, 2023 and December 31, 2022, the total carrying amount of long-term loans was $ 60,735 and $ 21,009 , compared with an estimated f air value of $ 56,462 and $ 18,538 , r e spectively. The fair value of the long-term loans is estimated by discounting cash flows using interest rates currently available for debts with similar terms and maturities (Level 2 fair value measurement). Refer to Note 2 for an explanation of the fair value hierarchy structure. Scheduled principal payments for the outstanding long-term loans, including the current portion, as of December 31, 2023 are as follows: Year ending December 31, 2024 $ 6,783 2025 44,087 2026 1,855 2027 1,929 2028 2,007 Thereafter 4,074 $ 60,735 For the years ended December 31, 2023 and 2022, respectively, $ 1,100 and $ 845 of interest expense related to long-term borrowings was incurred. For the year ended December 31, 2021, $ 1,040 of interest related to long-term borrowings was incurred, of which $ 65 was charged to interest expense and $ 975 was capitalized as other long-term assets. NOTE 13 – OTHER LONG-TERM LIABILITIES Other long-term liabilities represent government subsidies received from mainland China governmental authorities for development and commercialization of certain technology but not yet recognized (note 2). As of December 31, 2023 and 2022, other long-term liabilities consisted of the following unearned government subsidies: December 31, 2023 2022 Subsidies to Stress Free Polishing project, commenced in 2008 and 2017 $ 475 $ 611 Subsidies to other cleaning tools, commenced in 2020 632 785 Subsidies to SW Lingang R&D development in 2021 3,467 4,266 Subsidies to CO2 Technology 275 965 Other 1,024 694 Total $ 5,873 $ 7,321 NOTE 14 – LONG-TERM INVESTMENTS On September 6, 2017, ACM and Ninebell Co., Ltd. (“Ninebell”), a Korean company that is one of the Company’s principal material suppliers, entered into an ordinary share purchase agreement, effective as of September 11, 2017, pursuant to which Ninebell issued to ACM ordinary shares representing 20 % of Ninebell’s post-closing equity for a purchase price of $ 1,200 , and a common stock purchase agreement, effective as of September 11, 2017, pursuant to which ACM issued 400,002 shares of Class A common stock to Ninebell for a purchase price of $ 1,000 at $ 2.50 per share. The investment in Ninebell is accounted for under the equity method. On June 27, 2019, ACM Shanghai and Shengyi Semiconductor Technology Co., Ltd. (“Shengyi”), a company based in Wuxi, China that is one of the Company’s component suppliers, entered into an agreement pursuant to which Shengyi issued to ACM Shanghai shares representing 15 % of Shengyi’s post-closing equity for a purchase price of $ 109 . The investment in Shengyi is accounted for under the equity method. In September 2023, the Company invested additional 114 Table of Contents RMB 6,100 ($ 900 ) to Shengyi. As the additional investment is not in substance common stock, the Company measures the additional investment in Shengyi at measurement alternative. On September 5, 2019, ACM Shanghai entered into a Partnership Agreement with six other investors, as limited partners, and Beijing Shixi Qingliu Investment Co., Ltd., as general partner and manager, with respect to the formation of Hefei Shixi Chanheng Integrated Circuit Industry Venture Capital Fund Partnership (LP), a Chinese limited partnership based in Hefei, China. Pursuant to such Partnership Agreement, on September 30, 2019, ACM Shanghai invested RMB 30,000 ($ 4,200 ), which represented 10 % of the partnership’s total subscribed capital. The investment in Hefei Shixi Chanheng Integrated Circuit Industry Venture Capital Fund Partnership (LP) is accounted for under the equity method in accordance with ASC 323-30-S99-1. On October 29, 2021, ACM Shanghai and Waferworks (Shanghai) Co., Ltd, or Waferworks, a company based in Shanghai, China, and one of the Company’s customers, entered into an agreement pursuant to which Waferworks issued to ACM Shanghai shares representing 0.25 % of Waferworks’ post-closing equity for a purchase price of $ 1,568 . As the investment is not in substance common stock and there is no readily determinable fair value, the Company measures the investment in Waferworks at measurement alternative. On August 17, 2022, ACM Singapore and Wooil Flucon Co., Ltd. (“Wooil”), a company based in Korea and a potential component supplier to the Company, entered into an agreement pursuant to which Wooil, on September 1, 2022, issued to ACM Singapore shares representing 20 % of Wooil’s post-closing equity for a purchase price of $ 1,000 . The investment in Wooil is accounted for under the equity method. In September 2023, ACM Shanghai entered into a partnership agreement with Company A to invest RMB 30,000 ($ 4,200 ), which represented 4.37 % of the partnership's total subscribed capital. Since there is no readily determinable fair value, the Company measures the investments at measurement alternative. In November 2023, ACM Shanghai entered into a partnership agreement with Company B to invest RMB 6,600 ($ 930 ), which represented 1.38 % of the partnership's total subscribed capital. Since there is no readily determinable fair value, the Company measures the investments at measurement alternative. December 31, Equity investee: 2023 2022 Ninebell $ 5,632 $ 5,199 Wooil 1,003 1,011 Shengyi 1,693 1,168 Hefei Shixi 9,174 8,645 Subtotal 17,502 16,023 Investments accounted for using measurement alternative: Waferworks 1,412 1,436 Shengyi 857 — Company A 4,236 — Company B 932 — Other 2,941 — Total $ 27,880 $ 17,459 The Company recognized $ 1,465 , nil , and nil (upward adjustments) resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer on the consolidated statements of comprehensive income (loss) for the years ended December 31, 2023, 2022, and 2021, respectively. No unrealized losses (downward adjustments) were recorded by the Company during the years ended December 31, 2023, 2022, and 2021. NOTE 15 – SHORT-TERM INVESTMENTS 115 Table of Contents Pursuant to a Partnership Agreement dated June 9, 2020 (the “Partnership Agreement”) and a Supplementary Agreement thereto dated June 15, 2020 (the “Supplementary Agreement”), ACM Shanghai acquired shares of SMIC in July 2020. Shares of SMIC are listed on the STAR Market. Pursuant to an Agreement entered into on September 19, 2022 (the ‘‘Agreement’’), ACM Shanghai became a limited partner of the Nuode Asset Fund Pujiang No. 783 Single Asset Management Plan (‘‘Nuode Asset Fund’’), a Chinese limited partnership formed by Nuode Asset Management Co., Ltd, a financial services firm based in Shanghai, China. Nuode Asset Fund was formed to establish a special fund with the purpose to participate in certain technology related investments in mainland China. Subsequent to the future purchase, any investment will be held by Nuode Asset Fund and restricted for a minimum period of nine months. The limited partners of the Nuode Asset Fund contributed a $ 22,160 to the fund, of which ACM Shanghai contributed $ 4,196 , or 18.75 % of the contribution on September 27, 2022. In December 2022, the Nuode Asset Fund purchased shares in the secondary stock offering of a publicly traded mainland China-stock listing. The number of shares owned by Nuode Asset Fund was apportioned to all of the limited partners in proportion to their respective capital contributions which is 18.75 % in the case of ACM Shanghai. Pursuant to a Share Purchase Agreement dated June 2023, ACM Shanghai acquired shares of Huahong Semiconductor Limited (“Huahong”) in July 2023 with amount of $ 13,930 . The shares held by ACM Shanghai are restricted for sale for a minimum period of twelve months. Huahong completed it STAR IPO in August 2023. Pursuant to a Share Purchase Agreement dated August 2023, ACM Shanghai acquired shares of Zhongjuxin Limited Company (“Zhongjuxin”) in September 2023 with amount of RMB $ 4,179 . The shares held by ACM Shanghai are restricted for sale for a minimum period of twelve months. Zhongjuxin completed it STAR IPO in September 2023. The components of short-term investments were as follows: December 31, 2023 2022 Short-term investments listed in Shanghai Stock Exchange Cost $ 20,155 $ 14,779 Market value $ 21,312 $ 20,209 NOTE 16 – RELATED PARTY BALANCES AND TRANSACTIONS Ninebell Ninebell is an equity investee of ACM (Note 14) and is the Company’s principal supplier of robotic delivery system subassemblies used in our single-wafer cleaning equipment. The Company purchases equipment from Ninebell for production in the ordinary course of business. The Company pays for a portion of the equipment in advance and is obligated for the remaining amounts upon receipt of the product. Shengyi Shengyi is an equity investee of ACM Shanghai (Note 14) and is one of the Company’s component suppliers in mainland China. The Company purchases components from Shengyi for production in the ordinary course of business. The Company incurs a service fee related to installation and hook-up fees which is recorded within cost of revenue on the Company’s consolidated statements of comprehensive income (loss). The Company pays for a portion of the raw materials in advance and is obligated for the remaining amounts upon receipt of the product. All related party outstanding balances are short-term in nature and are expected to be settled in cash. 116 Table of Contents The following tables represent related party transactions with the equity investees as of December 31, 2023 and 2022: December 31, Advances to related party 2023 2022 Ninebell $ 2,432 $ 3,322 December 31, Accounts payable 2023 2022 Ninebell $ 7,624 $ 10,526 Shengyi 3,783 3,942 Total $ 11,407 $ 14,468 Year Ended December 31 Purchase of materials 2023 2022 2021 Ninebell $ 42,737 $ 40,985 $ 33,659 Shengyi 5,006 5,350 2,434 Total $ 47,743 $ 46,335 $ 36,093 Year Ended December 31 Service fee charged by 2023 2022 2021 Shengyi $ 820 $ 543 $ 561 Total $ 820 $ 543 $ 561 NOTE 17 – COMMON STOCK At December 31, 2023 and 2022, ACM was authorized to issue 150,000,000 shares of Class A common stock and 5,307,816 shares of Class B common stock, each with a par value of $ 0.0001 . Each share of Class A common stock is entitled to one vote, and each share of Class B common stock is entitled to twenty votes and is convertible at any time into one share of Class A common stock. Shares of Class A common stock and Class B common stock are treated equally, identically and ratably with respect to any dividends declared by the Board of Directors unless the Board of Directors declares different dividends to the Class A common stock and Class B common stock by getting approval from a majority of common stockholders. During the year ended December 31, 2023, ACM issued 1,380,886 shares of Class A common stock upon option exercises by employees and non-employees. During the year ended December 31, 2022, ACM issued 980,354 shares of Class A common stock upon options exercises by certain employees and non-employees and an additional 66,003 shares of Class A common stock upon conversion of an equal number of shares of Class B common stock. At December 31, 2023 and 2022, the number of shares of Class A common stock issued and outstanding was 56,036,172 and 54,655,286 , respectively. At December 31, 2023 and 2022, the number of shares of Class B common stock issued and outstanding was 5,021,811 and 5,021,811 , respectively. NOTE 18 – STOCK-BASED COMPENSATION ACM’s stock-based compensation consists of employee and non-employee awards issued under its 1998 Stock Option Plan and its 2016 Omnibus Incentive Plan. The vesting condition may consist of service period condition or certain performance conditions, as determined by the Board of Directors. The fair value of the stock options granted with a service period based condition and/or performance condition is estimated at the date of grant using the Black-Scholes option pricing model. The fair value of the stock option s granted with a market based condition is estimated at the date of grant using the Monte Carlo simulation model. 117 Table of Contents Employee Awards The following table summarizes the ACM’s employee share option activities during the years ended December 31, 2021, 2022 and 2023: Number of Option Shares Weighted Average Grant Date Fair Value Weighted Average Exercise Price Weighted Average Remaining Contractual Term Outstanding at December 31, 2020 9,574,233 $ 1.71 $ 4.24 7.13 years Granted 421,200 16.05 35.38 Exercised ( 1,431,174 ) 0.82 2.10 Forfeited/cancelled ( 162,012 ) 8.32 19.03 Outstanding at December 31, 2021 8,402,247 $ 2.45 $ 5.88 6.53 years Granted 1,653,300 10.31 22.41 Exercised ( 416,546 ) 1.20 2.97 Forfeited/cancelled ( 427,360 ) 11.41 25.24 Outstanding at December 31, 2022 9,211,641 $ 3.58 $ 8.24 6.36 years Granted 2,230,500 10.38 13.91 Exercised ( 1,080,952 ) 0.90 2.28 Forfeited/cancelled ( 362,552 ) 11.24 22.92 Outstanding at December 31, 2023 9,998,637 $ 5.15 $ 9.47 6.17 years Vested and exercisable at December 31, 2023 6,044,572 As of December 31, 2023, $ 27,152 of total unrecognized employee stock-based compensation expense, net of estimated forfeitures, related to stock-based awards for ACM was expected to be recognized over a weighted-average period of 3.96 years. Total recognized compensation cost may be adjusted for future changes in estimated forfeitures. The aggregate intrinsic value of options exercised in the years ended December 31, 2023, 2022, and 2021 was $ 15,457 , $ 6,429 , and $ 43,356 , respectively. The aggregate intrinsic value of options outstanding and exercisable as of December 31, 2023 were $ 108,771 and $ 82,848 , respectively. The fair value of options granted to employees is estimated on the grant date using the Black-Scholes valuation model with the following assumptions: Year ended December 31, 2023 2022 2021 Fair value of common stock(1) $ 11.85 -$ 17.23 $ 16.83 - 25.45 $ 12.79 - 17.02 Expected term in years(2) 5.50 - 6.25 5.50 - 6.25 6.25 Volatility(3) 84.95 - 86.45 % 49.43 - 50.87 % 48.53 - 49.47 % Risk-free interest rate(4) 4.16 %- 4.69 % 1.70 %- 3.04 % 1.00 %- 1.44 % Expected dividend(5) 0 % 0 % 0 % (1) Fair value of Class A common stock value was the closing market price of the Class A common stock on the grant date. (2) Expected term of share options is based on the average of the vesting period and the contractual term for each grant. (3) Volatility is calculated based on the historical volatility of ACM in the period equal to the expected term of each grant. (4) Risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the share options in effect at the time of grant. 118 Table of Contents (5) Expected dividend is assumed to be 0 % as ACM has no history or expectation of paying a dividend on its common stock. Non-employee Award The following table summarizes the ACM's non-employee share option activities during the years ended December 31, 2021, 2022 and 2023: Number of Option Shares (1) Weighted Average Grant Date Fair Value (1) Weighted Average Exercise Price (1) Weighted Average Remaining Contractual Term Outstanding at December 31, 2020 2,508,114 $ 0.34 $ 1.02 4.92 years Exercised ( 439,629 ) 0.37 1.28 Forfeited/cancelled ( 1,467 ) 0.11 0.28 Outstanding at December 31, 2021 2,067,018 $ 0.33 $ 0.97 3.98 years Exercised ( 563,808 ) 0.21 0.51 Forfeited/cancelled ( 19,552 ) 0.21 0.48 Outstanding at December 31, 2022 1,483,658 $ 0.38 $ 1.15 3.68 years Exercised ( 299,934 ) 0.24 0.55 Forfeited/cancelled ( 12,929 ) 0.22 0.50 Outstanding at December 31, 2023 1,170,795 $ 0.42 $ 1.31 2.66 years Vested and exercisable at December 31, 2023 1,167,045 As of December 31, 2023, $ 9 of total unrecognized non-employee stock-based compensation expense, net of estimated forfeitures, related to stock-based awards were both expected to be recognized over a weighted-average period of 0.20 year. Total recognized compensation cost may be adjusted for future changes in estimated forfeitures. The aggregate intrinsic value of options exercised in the years ended December 31, 2023, 2022 and 2021was $ 3,796 , $ 9,110 and $ 11,993 , respectively. The aggregate intrinsic value of options outstanding and exercisable as of December 31, 2023 were $ 21,342 and $ 21,301 , respectively. ACM Shanghai 2019 Option Grants In January 2020, ACM Shanghai adopted a 2019 Stock Option Incentive Plan (the “2019 Subsidiary Stock Option Plan”) that provides for, among other incentives, the granting to officers, directors, employees of options to purchase shares of ACM Shanghai’s common stock. The vesting conditions consist of service periods conditions and performance conditions related to certain earning targets determined by the Board of Directors of ACM Shanghai. 119 Table of Contents The following table summarizes the ACM Shanghai employee stock option activities during the years ended December 31, 2023, 2022 and 2021 : Number of Option Shares in ACM Shanghai Weighted Average Grant Date Fair Value Weighted Average Exercise Price Weighted Average Remaining Contractual Term Outstanding at December 31, 2020 5,423,654 Forfeited/cancelled ( 46,154 ) 0.24 2.04 2.50 years Outstanding at December 31, 2021 5,377,500 $ 0.24 $ 2.04 2.50 years Outstanding at December 31, 2022 5,377,500 $ 0.23 $ 1.93 1.76 years Exercised ( 2,150,309 ) 0.20 1.85 Forfeited/cancelled ( 92,308 ) 0.22 1.85 Outstanding at December 31, 2023 3,134,883 $ 0.24 $ 1.85 0.85 years Vested and exercisable at December 31, 2023 492,308 The aggregate intrinsic value of options exercised in the years ended December 31, 2023 and 2022 and 2021 was $ 31,144 , nil and nil , respectively. The aggregate intrinsic value of options outstanding and exercisable as of December 31, 2023 were $ 40,663 and $ 6,386 , respectively. ACM Shanghai 2023 Option Grants In June 2023, ACM Shanghai adopted a 2023 Stock Option Incentive Plan ( the "2023 Subsidiary Stock Option Plan”) that provides for, among other incentives, the granting to officers, directors, employees of options to purchase shares of ACM Shanghai’s common stock. The vesting conditions consist of service periods conditions and performance conditions related to certain sales and research and development progress targets determined by the Board of Directors of ACM Shanghai. The following table summarizes the ACM Shanghai 2023 Subsidiary Stock Option Plan’s stock option activities during the year ended December 31, 2023: Number of Option Shares in ACM Shanghai Weighted Average Grant Date Fair Value Weighted Average Exercise Price Weighted Average Remaining Contractual Term Outstanding at December 31, 2022 — $ — $ — 0.00 years Granted 10,648,500 $ 9.49 $ 7.06 Forfeited/cancelled ( 73,000 ) $ 9.49 $ 7.06 3.09 years Outstanding at December 31, 2023 10,575,500 $ 9.49 $ 7.06 3.09 years Vested and exercisable at December 31, 2023 — The fair value of options granted to employees is estimated on the grant date using the Black-Scholes valuation with following assumptions: Year Ended December 31, 2023 Fair value of share of common stock (1) $ 14.87 Expected term in years (2) 1.5 - 4.5 Volatility (3) 60.00 %- 60.60 % Risk-free interest rate (4) 1.50 %- 2.75 % 120 Table of Contents (1) Equal to closing value on the grant date. (2) Expected term of share options is based on the average of the vesting period and the contractual term for each grant. (3) Volatility is calculated based on the historical volatility of ACM in the period equal to the expected term of each grant. (4) Risk-free interest rate is based on the yields of RMB deposit in mainland China with maturities similar to the expected term of the share options in effect at the time of grant. The aggregate intrinsic value of options outstanding as of December 31, 2023 was $ 81,981 . As of December 31, 2023, $ 79,882 of total unrecognized employee stock-based compensation expense, net of estimated forfeitures, related to ACM Shanghai stock-based awards were expected to be recognized over a weighted-average period of 2.1 years. Total recognized compensation cost may be adjusted for future changes in estimated forfeitures. The following table summarizes the components of stock-based compensation expense included in the consolidated statements of comprehensive income (loss): Year Ended December 31, 2023 2022 2021 Stock-Based Compensation Expense: Cost of revenue $ 1,406 $ 520 $ 397 Sales and marketing expense 5,684 1,877 1,802 Research and development expense 8,459 2,565 1,115 General and administrative expense 11,789 2,768 1,803 $ 27,338 $ 7,730 $ 5,117 Year Ended December 31, 2023 2022 2021 Stock-based compensation expense by type: Employee stock option plan $ 6,213 $ 7,346 $ 4,674 Non-employee stock option plan 46 46 94 2019 and 2023 Subsidiary stock option plans 21,079 338 349 $ 27,338 $ 7,730 $ 5,117 NOTE 19 – INCOME TAXES The following represent the U.S. and foreign components of income before income tax for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 U.S. federal $ 10,420 $ ( 3,456 ) $ ( 4,389 ) Foreign 105,796 70,818 47,444 Income before income taxes $ 116,216 $ 67,362 $ 43,055 121 Table of Contents The following represent components of the income tax benefit (expense) for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 Current: U.S. federal $ ( 12,757 ) $ ( 479 ) $ ( 91 ) U.S. state ( 150 ) ( 18 ) ( 2 ) Total U.S. current tax benefit (expense) ( 12,907 ) ( 497 ) ( 93 ) Foreign ( 19,696 ) ( 11,139 ) ( 2,195 ) Total current tax expense ( 32,603 ) ( 11,636 ) ( 2,288 ) Deferred: U.S. federal 7,316 ( 10,927 ) 2,089 U.S. state 63 8 - Total U.S. deferred tax benefit (expense) 7,379 ( 10,919 ) 2,089 Foreign 5,860 5,757 65 Total deferred tax benefit 13,239 ( 5,162 ) 2,154 Total income tax expense $ ( 19,364 ) $ ( 16,798 ) $ ( 134 ) Tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets at December 31, 2023 and 2022 are presented below: December 31, 2023 2022 Deferred tax assets: Net operating loss carry forwards (offshore) $ 11,499 $ 1,456 Net operating loss carry forwards (U.S.) and credit 4,930 1,246 Deferred revenue (offshore) 2,277 1,826 Accruals (U.S.) 3,632 100 Reserves and other (offshore) 4,662 3,655 Stock-based compensation (U.S.) 2,455 2,060 Stock-based compensation (offshore) 4,393 1,229 Lease liability 1,252 414 Total gross deferred tax assets 35,100 11,986 Less: valuation allowance ( 11,917 ) ( 1,782 ) Total deferred tax assets 23,183 10,204 Deferred tax liabilities: Fixed assets ( 1,325 ) ( 443 ) Equity Investments and unrealized gain on short-term investments ( 1,587 ) ( 3,059 ) Total deferred tax liabilities ( 2,912 ) ( 3,502 ) Deferred tax assets, net $ 20,271 $ 6,702 The Company considers all available evidence to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carry-forward periods), and projected taxable income in assessing the realizability of deferred tax assets. In making such judgments, significant weight is given to evidence that can be objectively verified. Based on all available evidence, a partial valuation allowance 122 Table of Contents has been established against some net deferred tax assets as of December 31, 2023 and 2022, based on estimates of recoverability. In order to fully realize the deferred tax assets, the Company must generate sufficient taxable income in future periods before the expiration of the deferred tax assets governed by the tax code. As of December 31, 2023 and 2022, the Company had valuation allowances, respectively, of $ 29 and $ 49 for U.S. federal purposes, $ 279 and $ 277 for U.S. state purposes and $ 11,585 and $ 1,456 for mainland China income tax purposes. As of December 31, 2023 and 2022, the Company had net operating loss carry-forwards of, respectively, $ 3,121 and $ 4,385 for U.S. federal purposes, $ 593 and $ 545 for U.S. state purposes and $ 46,467 and $ 6,474 for mainland China income tax purposes. Such losses begin expiring in 2036, 2032 and 2025 for U.S. federal, U.S. state and mainland China income tax purposes, respectively. Under provisions of the U.S. Internal Revenue Code (the “IRC”), a limitation applies to the use of the U.S. net operating loss and credit carry-forwards that would be applicable if ACM experiences an “ownership change,” as defined in IRC Section 382. ACM conducted an analysis of its stock ownership under IRC Section 382 and $ 3,121 of the net operating loss carryforwards are subject to annual limitation as a result of the ownership change in 2017. The net operating loss carryforwards are not expected to expire before utilization. The Company’s effective tax rate differs from statutory rates of 21% for U.S. federal income tax purposes and 12.5 % to 25 % for mainland China income tax purpose due to the effects of the valuation allowance and certain permanent differences as they pertain to book-tax differences in employee stock-based compensation and non-US research expense. A new requirement to capitalize and amortize previously deductible research and experimental expenses resulting from a change in Section 174 made by the Tax Cuts and Jobs Act of 2017 (the “TCJA”) became effective on January 1, 2022. Under the TCJA, the Company is required to capitalize, and subsequently amortize R&D expenses over fifteen years for research activities conducted outside of the U.S. The capitalization of overseas R&D expenses resulted in a significant increase in the Company’s global intangible low-taxed income inclusion beginning in 2022. Pursuant to the Corporate Income Tax Law of mainland China, all of the Company’s mainland China subsidiaries are liable to mainland China Corporate Income Taxes at a rate of 25 %, except for ACM Shanghai and ACM Lingang. According to Guoshuihan 2009 No. 203, an entity certified as an “advanced and new technology enterprise” is entitled to a preferential income tax rate of 15 %. ACM Shanghai was certified as an “advanced and new technology enterprise” in 2012 and again in 2016, 2018, and 2021, effective until December 31, 2023, and is expected to be re-certified for future years in 2024. In 2022, ACM Shanghai was certified as an eligible integrated circuit production enterprise and was entitled to a preferential income tax rate of 12.5 % from January 1, 2020 to December 31, 2022. Certain entities which meet requirements according to the Policy of the Lingang New area in China (Shanghai) Pilot Free Trade Zone are entitled to a preferential income tax rate of 15 %. ACM Lingang was certified for this in 2021, and this preferential income tax rate is valid from January 1, 2020 until December 31, 2024. The provision for mainland China corporate income tax for ACM Shanghai is calculated by applying the income tax rate of 15 % for the year ended December 31, 2023 and 12.5 % for the years ended December 31, 2022 and 2021. Income tax expense for the years ended December 31, 2023, 2022 and 2021 differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% to pretax income as a result of the following: Year Ended December 31, 2023 2022 2021 Effective tax rate reconciliation: Income tax provision at statutory rate 21.00 % 21.00 % 21.00 % Stock Compensation ( 2.00 ) ( 2.72 ) ( 12.75 ) Foreign rate differential ( 10.47 ) ( 9.43 ) ( 11.60 ) Other permanent difference 0.03 ( 0.26 ) ( 0.23 ) Foreign income taxed in US 7.39 19.86 10.32 Foreign Research Expense ( 8.01 ) ( 4.79 ) ( 6.59 ) Change in valuation allowance 8.72 1.28 0.16 Total income tax expense 16.66 % 24.94 % 0.31 % 123 Table of Contents Tax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The aggregate changes in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for the years ended December 31, 2023 and 2022, were as follows: Year Ended December 31, 2023 2022 2021 Beginning balance $ 8,448 $ 6,066 $ 570 Increase of unrecognized tax benefits taken in prior years 199 — 52 Increase of unrecognized tax benefits related to current year 4,379 2,623 5,476 Reductions for tax positions related to prior years — ( 241 ) ( 32 ) Ending balance $ 13,026 $ 8,448 $ 6,066 The Company is subject to taxation in the United States, state, and foreign jurisdictions. All tax returns will remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating loss or credits. Certain tax years are subject to foreign income tax examinations by tax authorities until the statute of limitations expire. The Company had $ 13,026 and $ 8,448 of unrecognized tax benefits as of December 31, 2023 and 2022, respectively. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2023 and 2022, respectively, the Company had $ 1,667 and $ 508 of accrued penalties related to uncertain tax positions, all of which was recognized in the Company’s consolidated statements of comprehensive income (loss) for the year then ended. The amount of the unrecognized tax benefit that, if recognized, would impact the effective tax rate was $ 12,943 as of December 31, 2023. There were no ongoing examinations by taxing authorities as of December 31, 2023 or 2022. Prior to the Tax Cuts and Jobs Act of 2017 (the "Tax Act"), the Company asserted that all unremitted earnings of its foreign subsidiaries were considered indefinitely reinvested. As a result of the Tax Act, the Company reported and paid U.S. tax on the majority of its previously unremitted foreign earnings, and repatriations of foreign earnings will generally be free of U.S. federal tax, but may incur other taxes such as withholding or state taxes. As of December 31, 2023, the Company has not made a provision for U.S. or additional foreign withholding taxes on approximately $ 130 million of undistributed earnings of its foreign subsidiaries that is indefinitely reinvested. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances. NOTE 20 – SEGMENT INFORMATION The Company identifies operating segments according to how the business activities are managed and evaluated. The Company’s chief operating decision maker (“CODM”) has been identified as ACM’s Chief Executive Officer. The Company's operating segments include ACM Research and ACM Shanghai. As the Company is engaged in the developing, manufacture and sale of capital equipment to global semiconductor manufacturers, and each of the operating segments share similar economic and other qualitative characteristics, the results of the Company’s operating segments are aggregated into one reportable segment. For geographical reporting, revenue by geographic location is determined by the location of customers’ facilities to which products were shipped. Long-lived assets consist primarily of property, plant and equipment, other long-term assets, and 124 Table of Contents right-of-use assets and are attributed to the geographic location in which they are located. Long-lived assets by geographic region as of the years ended were as follows: December 31, 2023 2022 Long-lived assets by geography: Mainland China $ 209,725 $ 140,481 Korea 12,190 3,830 United States 1,276 10 Total $ 223,191 $ 144,321 NOTE 21 – COMMITMENTS AND CONTINGENCIES The Company leases offices and manufacturing locations under non-cancelable operating lease agreements. See note 11 for future minimum lease payments under non-cancelable operating lease agreements with initial terms of one year or more. As of December 31, 2023, the Company had $ 30,936 of open commitments to construction contracts and had additional $ 7,413 of capital investment commitments. Covenants in ACM Shengwei’s Grant Contract for State-owned Construction Land Use Right in Shanghai City (Category of R&D Headquarters and Industrial Projects) with the China (Shanghai) Pilot Free Trade Zone Lingang Special Area Administration require, among other things, that ACM Shengwei pay liquidated damages in the event that (a) it does not make a total investment (including the costs of construction, fixtures, equipment and grant fees) of at least RMB 450.0 million ($ 63,400 ) or (b) within six years after the land use right is obtained, the Company does not (i) generate a minimum specified amount of annual sales of products manufactured on the granted land or (ii) pay to mainland China at least RMB 157.6 million ($ 22,000 ) in annual total taxes (including value-added taxes, corporate income tax, personal income taxes, urban maintenance and construction taxes, education surcharges, stamp taxes, and vehicle and shipping taxes) as a result of operations in connection with the granted land. As of December 31, 2023 and December 31, 2022, the Company had incurred in total $ 116,932 and $ 35,376 , respectively for its Lingang-related investments. The Construction Completion Milestone was required to be met by January 9, 2024 but was not achieved. However, ACM Lingang believes it will receive the refund without penalty based on its explanation to the respective regulatory authorities of logistics-related delays, and expectations that it will meet the milestone before July 9, 2024. The Company cannot guarantee that ACM Lingang will achieve the missed milestone in 2024, or even if it does achieve the milestone in 2024, that it will be refunded some or all of the 20 % portion of the performance deposit of RMB 2.5 million ($ 0.4 million). In the normal course of business, the Company is subject to contingencies, including legal proceedings and environmental claims arising out of the normal course of businesses that relate to a wide range of matters, including among others, contracts breach liability. The Company records accruals for such contingencies based upon the assessment of the probability of occurrence and, where determinable, an estimate of the liability. Management may consider many factors in making these assessments including past history, scientific evidence and the specifics of each matter. Some of these contingencies involve claims that are subject to substantial uncertainties and unascertainable damages. The Company’s management has evaluated all such proceedings and claims that existed as of December 31, 2023 and 2022. In the opinion of management, no provision for liability nor disclosure was required as of December 31, 2023 related to any claim against the Company because: (a) there is not a reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim; (b) a reasonably possible loss or range of loss cannot be estimated; or (c) such estimate is immaterial. As of December 31, 2023, the Company had no outstanding legal proceedings. NOTE 22 – PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION The Company performed a test on the restricted net assets of consolidated subsidiaries in accordance with Rule 4-08(e)(3) of Regulation S-X of the SEC and concluded that it was applicable for the Company to disclose the financial information 125 Table of Contents for ACM only. Certain information and footnote disclosures generally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The footnote disclosure contains supplemental information relating to the operations of ACM separately. ACM Shanghai paid a dividend to ACM during the year ended December 31, 2023 (Note 2). Except for long-term obligations, or guarantees, and loan borrowed by ACM Inc. from CITIC. (note 12), ACM does not have significant capital or other commitments, as of December 31, 2023 or 2022. The following represents condensed unconsolidated financial information of ACM only as of December 31, 2023 and 2022, and for the years ended December 31, 2023, 2022 and 2021: CONDENSED BALANCE SHEETS December 31, 2023 2022 Assets Current assets: Cash and cash equivalents $ 41,616 $ 23,853 Accounts receivable 988 24 Due from intercompany 3,176 - Other receivable 5,803 5,017 Prepaid expenses 385 134 Total current assets 51,968 29,028 Deferred tax assets 20,271 6,703 Property, plant and equipment, net 134 - Investment in consolidated subsidiaries and equity method investee 733,382 653,926 Total assets $ 805,755 $ 689,657 Liabilities and Stockholders’ Equity Loan borrowings $ 14,120 $ — Accounts payable 524 $ 236 Other payables 5,176 4,409 Income taxes payable 6,402 3,469 FIN-48 payable 12,149 6,686 Total liabilities 38,371 14,800 Total stockholders’ equity 767,384 674,857 Total liabilities and stockholder’s equity $ 805,755 $ 689,657 126 Table of Contents CONDENSED STATEMENTS OF OPERATIONS Year Ended December 31, 2023 2022 2021 Revenue $ 6,354 $ 569 $ 16 Cost of revenue ( 4,336 ) - — Gross profit 2,018 569 16 Operating expenses: Sales and marketing expenses ( 4,715 ) ( 3,193 ) ( 2,443 ) General and administrative expenses ( 7,840 ) ( 5,421 ) ( 5,116 ) Loss from operations ( 10,537 ) ( 8,045 ) ( 7,543 ) Equity in earnings of consolidated subsidiaries and equity method investees 73,707 32,145 43,866 Interest income, net 799 57 54 Interest expense, net ( 66 ) ( 7 ) - Other income, net 18,476 2,148 1,380 Income before income taxes 82,379 26,298 37,757 Income tax benefit ( 5,030 ) 12,965 - Net income $ 77,349 $ 39,263 $ 37,757 CONDENSED STATEMENTS OF CASH FLOWS Year Ended December 31, 2023 2022 2021 Net cash provided by (used in) operating activities $ 1,489 $ ( 5,997 ) $ ( 5,902 ) Net cash used in investing activities ( 149 ) ( 1,000 ) - Net cash provided by financing activities 16,423 1,314 5,250 Net increase (decrease) in cash and cash equivalents 17,763 ( 5,683 ) ( 652 ) Cash and cash equivalents, beginning of year 23,853 29,536 30,188 Cash and cash equivalents, end of year $ 41,616 $ 23,853 $ 29,536 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Dismissal of Previous Independent Registered Public Accounting Firm On July 21, 2023, we were informed by Armanino that it would resign as our independent auditor effective as of the earlier of (a) the date we engaged a new independent registered public accounting firm or (b) the filing of our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023. Armanino advised us that its decision to resign was due to Armanino’s decision to exit from the practice of providing financial statement audit services to all public companies. Armanino is not required to and did not seek our consent to its decision to resign as our independent registered public accounting firm. As a result, neither our Board of Directors nor the Audit Committee participated in Armanino’s decision to resign. In light of Armanino’s determination, the Audit Committee initiated a process to select and appoint a new accounting firm to serve as our independent registered public accountant commencing with the audit of our financial statements for the fiscal year ended December 31, 2023. Armanino’s audit report on our consolidated financial statements as of and for the year ended December 31, 2022 did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles. Armanino was first appointed as our independent registered public accountant for the fiscal year ended December 31, 2022, and did not audit our financial statements for the fiscal year ended December 31, 2021 or any prior period. 127 Table of Contents As disclosed in this report and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, Armanino issued an adverse opinion on our internal control over financial reporting for the fiscal year ended December 31, 2022, as a result of material weaknesses identified by Armanino and our management. There were not any disagreements or differences of opinion between Armanino and us with respect to these material weaknesses or Armanino’s adverse opinion on our internal control over financial reporting. During the year ended December 31, 2022, and through the date of Armanino’s notification of resignation, there were no (a) disagreements with Armanino on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Armanino’s satisfaction, would have caused Armanino to make reference to the subject matter thereof in connection with its reports for such periods; or (b) except as described in the preceding paragraph, reportable events, as described under Item 304(a)(1)(v) of Regulation S-K. We provided a copy of the foregoing disclosures to Armanino and requested that Armanino furnish us with a letter addressed to the SEC, pursuant to Item 304(a)(3) of Regulation S-K, stating whether or not Armanino agreed with the above disclosures. A copy of Armanino’s letter dated July 27, 2023 furnished pursuant to that request is filed as Exhibit 16.01. Engagement of New Independent Registered Public Accounting Firm On September 14, 2023, the Audit Committee completed a competitive selection process to select and appoint a new accounting firm to serve as our independent registered public accounting firm commencing with the audit of our financial statements for the fiscal year ended December 31, 2023. As a result of this process, the Audit Committee approved the engagement of Ernst & Young Hua Ming LLP as our independent registered public accounting firm for the fiscal year ended December 31, 2023. The engagement of Ernst & Young Hua Ming LLP became effective on September 20, 2023. During the fiscal years ended December 31, 2022 and 2021 and the subsequent interim period from January 1, 2023 through September 20, 2023, neither we nor anyone on our behalf consulted with Ernst & Young Hua Ming LLP regarding either: (a) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, and no written report or oral advice was provided to us that Ernst & Young Hua Ming LLP concluded was an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issue; or (b) any matter that was either the subject of a “disagreement” or a “reportable event”, as such terms are defined in Items 304(a)(1)(iv) and (v), respectively, of Regulation S‑K and the related instructions. As previously disclosed in our Current Report on Form 8-K filed on July 27, 2023, Armanino informed us that it would resign as our independent registered public accounting firm effective as of the earlier of (a) the date we engaged a new independent registered public accounting firm or (b) the filing of our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023, as a result of Armanino’s decision to exit from the practice of providing financial statement audit services to all public companies. As a result, Armanino ceased to serve as our independent registered public accounting firm effective as of September 20, 2023. We provided a copy of the foregoing disclosures to Armanino and requested that Armanino furnish us with a letter addressed to the SEC, pursuant to Item 304(a)(3) of Regulation S-K, stating whether or not Armanino agreed with the above disclosures. A copy of Armanino’s letter dated September 26, 2023 furnished pursuant to that request is filed as Exhibit 16.02.